IRUK Top500 The multichannel response to Brexit
Chloe Rigby considers what Brexit means – so far – for the UK’s retailers, and considers how multichannel strategies might be recalibrated in response.
Brexit came as a surprise for many – and the decision provides a new starting point for retailers planning their international expansion strategies. How are multichannel and ecommerce traders responding, and how might they respond in the future?Reasons to be cheerful
Back in June, the UK’s decision to leave the European Union seemed momentous. One immediate effect was a slide in the value of sterling from which it has yet fully to recover. In the short term, that provided a sales boost for UK online and multichannel retailers already selling into European markets.
Musical instrument and equipment pureplay Gear4Music, for example, reported a spike in sales immediately after the vote. Sales to Europe were 191% up in the week between June 27 and July 3, compared to the same week a year earlier. For context, in the week to Sunday 19 June, sales to Europe were up by 120%.
Meanwhile, Burberry said it stood to benefit from the change in currency. When it updated the markets on its figures for the quarter to 30 June, the luxury retailer said that if exchange rates remained at current levels in its current financial year, it would expect profits to be up by about £90m on the same time last year.
Katrina Rattu, associate analyst at Verdict Retail
, says other luxury retailers can expect to benefit from the weakness of sterling. “Retailers such as Selfridges and Harrods are currently benefiting from the fall in sterling because of the influx in tourists,” she says. “They would look to take advantage of the lower pound, even if it’s in the short term. I suspect they’d look at their online platform as a strength and make sure they had effective social media posts to drive online traffic to their websites and then convert visitors to purchases.”
She advises that such retailers need to act quickly. “If a retailer is benefiting from the fall in the pound, it would make sense to make the most out of it that you can. That’s about making sure your online platform is good, that social media posts are effective and, that your products are of good quality, durable and multifunctional. If retailers are benefiting from the weaker pound, they should make sure they are doing that as much as possible right now because they don’t know if it will be long term or not.”Causes for concern
Some retailers have warned longer term of higher prices should the pound’s weakness persist. Next , for example, said that despite hedging that would keep its prices down until January 2017, its cost prices could rise by up to 5% next year.And there's more. Click here to read this piece, which first appeared in the IRUK Top500 Strategy & Innovation Performance Dimension Report in full. Click here to browse the Strategy & Innovation report, which also features an interview with Emma Mead of Holland & Barrett as well as 12 practical approaches to strategic and innovation planning.