The first impact that Hatton’s Model Railways saw when the UK voted to leave the EU was that sales went up, says its managing director Richard Davies.
The retailer, founded in 1946 by Norman Hatton, sells model railways to customers in the UK and, increasingly, around the world. Davies and his father first met Hatton’s as customers and when in 1999, as a computer science student, he found himself living on the same road as the company and was sent in by his father to make purchases. He suggested it needed a website – and for years he built and ran that website on a commission basis, working with Norman Hatton’s son Keith and daughter Christine. Keith died in 2008 and Davies bought the business.
Davies built the retailer’s website himself, but by 2017 it was using paper-based systems to handle 1,500 orders a day. That was unsustainable and Davies brought in third-party software to run both the warehouse and the checkout. Today Hattons turns over about £20m a year, and employs 67 people from its Cheshire base. It uses PeopleVox software to run its warehouse, and GFS software for its checkout, giving it support in areas from payments to customs tariffs. Currently about 10% of Hattons online sales are delivered overseas, but in summer 2016 there was a spike in international sales.
“We actually discovered as soon as we voted leave that we saw a big surge in revenue because the pound dipped and that meant people abroad were getting a lot more value for their money,” says Davies, speaking to InternetRetailing at IRX 2019. "Model railways customers are extremely shrewd, so we saw a big spike in sales in July and August 2016. Since then I think we’ve been affected by the same uncertainty that exists around Brexit, but our customers are quite a passionate and steady bunch in terms of products being released. When a product is announced their question might be about when it is being released, not necessarily how much it will cost."
In the run-up to Brexit, the retailer saw some of its smaller suppliers in Poland and Germany suspend shipments to in the run-up to March 29 as they became jittery about what tariffs the goods might attract, though those have since started to operate as normal. Most stock, however, comes in from China or via UK intermediaries.
Hatton’s has stockpiled supplies of cardboard packaging – although the packaging is made in the UK, the plastic tie around it comes from Europe. But Davies is relatively unconcerned about the impact of Brexit beyond that.
“Our philosophy really is that there are certain things that we believe are going to be self-sustaining,” he says. “The attitude is to find the right partners and make sure you minimise threats, so GFS’ checkout software means it can handle any Brexit scenario from worst case no deal to remaining as we are now, so we know we’re not going to have to make any quick changes to our systems. The GFS software will do that for us. We just need to go on running the business.
“If we move to World Trade Organisation rules every product in our database will need to have a grade corresponding with WTO rules. When customers come to complete their checkout the system sends the details of the order, the destination and the contents to GFS checkout. That looks at it and calculates the tax liability and passes that back to us to charge the card the appropriate amount.
“Let’s say there’s changes in the rules about exports. At the GFS end an administrator will change the rules and that will cascade into the checkout for all the users of GFS. We might have to worry about the impact of it, but the compliance angle is dealt with. GFS are looking after the taxation side and what needs to go on digitally. Our operations, our warehouse operations, won’t see any disruption whatsoever because GFS will look after that.”
Indeed, says Davies, he anticipates a rise in sales in the event of a no-deal Brexit if the value of the pound falls again. A larger threat to the business, he says, could come as Donald Trump and the US put pressure on China to revalue the currency. That’s an issue since Hattons has in recent years moved to making its own model railways, offering new engines for sale – and its products are made in China. “Brexit is something in the mind but it’s likely that the value of the dollar is going to buy fewer model railways in the future,” he says.
But, he adds, while Brexit will have a relatively slight impact on his business, it will be important for the country to deal with the issues that have been thrown up. “A lot of people think Brexit is the cause of a clash of opinions, but I think that Brexit matters because it has revealed differences in different parts of society – I think we’ve spent too long negotiating Brexit itself rather than getting back to the fact that the 52% vs 48% split is for me the biggest concern about society.
“We need to start dealing with that, move on from Brexit and start working out why you can split any room in two – and that is the real concern. So far no-one’s started doing something about that. It’s just been negotiations in Europe that has dominated politics.”
Hattons is ranked Top500 in IRUK Top500 research.
Image courtesy of Hatton’s