Brexit and Retail: Where are we now?
Well, after a lot of talking and an extraordinary election before the Summer, the negotiations are underway. So, what have we learnt following the June 2016 referendum?
- Immediately after the results were announced, the pound fell and has traded since at about 15% down on the dollar
- Contrary to the pundit’s forecasts, the UK economy has done surprisingly well, partly as exporters have been helped by their new-found competitiveness resulting from the pound’s devaluation, but imports have become more expensive
- Retail prices have, and are still, rising
- With price rises running ahead of wages, real incomes are falling
- The growth forecast for this year, from the Office of National Statistics, has been cut from 2.0% to 1.8%, falling to 1.6% in 2018 because of an expected slows down
- In their June Mansion House addresses, the Chancellor said no-one voted for Brexit to become poorer, but Carney, Governor of the Bank of England, said Brexit is likely to make them do so
In reality, little has changed as we haven’t left the EU. Real changes may only happen once the negotiations are complete. As uncertainty prevails, caution should be the order of the day.
So, what has the impact been on retail in general? Surprisingly little. In fact, the sales volumes have been on an upward trend since 2013 to the end of 2016. However this reversed in the first quarter of 2017, but then recovered immediately in July, with an 0.3% increase.
On a recent visit to my local shopping mall, it was very noticeable that nearly every shop had a sale or discount offering. One thing that was also very noteworthy on a BBC programme relating to retailing tactics, was that major retailers are now monitoring sales every two hours, enabling them to quickly change prices or offer deals. While I accept this would be impossible for most golf retailers, I do question how often they review their reports. Quite a lot of our customers admit to infrequently reviewing their reports. Some look once a quarter and a few weekly or monthly. When caution is the watchword, it’s important to monitor stock-turns selling off slow movers well, before the season ends.
My recommendation would be to get the money back in the bank ready for restocking for 2018. In order to do that you need to be checking your key reports weekly to make sure you are not behind the curve.
So, what has the impact been on the golf industry? In value terms, the moving annual total for sales has matched general retailing with a steady increase since April 2015, growing sharply over the last seven months. In unit terms, the picture is less positive. There has been growth in a number of categories, but some of the big ticket items are seeing decline as a result of the higher ASP’s. Eight out of the sixteen product categories monitored by Golf Datatech have seen their average selling price increase over the last six months by +7.0%. The top three are putters 13.9%, bags +13.2% and woods +19.8%. Interestingly though, two of these saw price decreases in the last month. No doubt the pounds devaluation will have played its part but to put these into context, inflation is currently running at only 2.3%.
My concerns are:
- There is still uncertainty about the future
- When real incomes decline there is less room for luxuries, so golf purchases may suffer
- Hefty price rises are great for turnover but may deter new entrants so badly needed by the sport
- It is vital that retailers don’t end the season and year with high stocks
It is therefore more and more essential to be on top of your business, dust off those reports and monitor them regularly!