Christmas is almost here! For most of the businesses, it is a crunch time to make the Christmas season a success, for some, it is time to reflect and focus more on the 2017 plan of action.
The great British consumer has continued to show resilience. That’s good for the economy, and it has kept the economy going post the referendum. Retail sales continue to grow in November and are expected to do at least OK for even December this year – see FT’s analysis below.
Currency devaluation is proving to be global consumer’s delight. “It’s incredible,” said Rikley John, a Los Angeles-based fashionist, referring to the price discounts available from high end British retailers due to weaker pound. “I’m buying this season’s collection from the best designers, anywhere from 20 to 40% off their U.S. prices. … You don’t have to wait until next season to get discounted sale prices in the U.S., and with the savings acquire more variety from the season, when buying from British retailers.” Some are even topping it up with a FREE shipping offers too. Apparently, consumers from around the world are checking in on London to pick up great deals that their homeland cannot provide.
Even fast moving consumer goods space has been impacted by this. For example, Amazon is taking massive advantage of this opportunity across its portfolio with price arbitrage opportunities across Europe. From electronics to skin care products, from tin food to on the go snacks, Amazon is actively seeking non-UK alternative sourcing options. Is your business insured against this?
What does it mean for the UK in 2017? Next year is likely to be very different from the consumer spending patterns. The squeeze on our incomes from slower employment growth and higher inflation will push the rate of growth of retail and grocery sales down sharply. It might start to seem a lot more real when we get into the second half of next 2017, that is when the Brexit impact might start to filter down the chain.
Could this be the opportunity to take PRICE to drive REVENUE GROWTH? For the majority of the businesses, the short answer is YES. While Unilever’s attempt to price increase went viral across the media, this would not stop others to take ‘reasonable’ prices in 2017. The truth is, having spoken to several large manufacturers, even if the pound currency fluctuation DOES NOT have a significant impact on their cost of goods, they are considering taking ‘reasonable’ pricing to take advantage of this situation. The market is expecting it, the consumers are unwantedly expecting it, the retailers are expecting it, so if it makes sense from both commercial and category point fo view, you should consider it. However, if pricing is implemented and communicated in the wrong way, it could backfire, so do your preparation well. Consider some of the following:
- Consider both – price increases and decreases. YES!
- Select the right segment of products to take pricing instead of a classic blanket approach
- Have a category led approach to deciding price increase levels instead of just following with what a spreadsheet analysis tells you to.
- Select the right timing for taking price changes, and ensure you have the right story for the retailers
- Study your competitors’ hard and have a defensible plan of action or plan B in place
- and more
In short, it could be an excellent opportunity to take pricing, but don’t rush into it without the right level of preparation.