Next results forewarn of wider retail woes (and how it will impact you)
Next had a pretty poor Christmas and only saw the sales come trickling in when they slashed their prices and even then sales fell by 7% against last year.
According to Chloe over on our sister publication Internet Retailing, “Next reiterated its guidance that it expected to raise prices by 5%, pushing sales revenue down by about 0.5% in response to the devaluation of sterling that followed the Brexit decision. It also expects to see general spending fall as rising inflation erodes earnings growth“.
The dilemma for Next is that whilst they refuse to discount on Black Friday, sales are stagnant unless they pull the discount lever, but world financial circumstances are forcing them to increase prices and that’s why they’re forecasting growth (or more likely contraction) of between -4.5% and +1.5% for the year ahead.
There’s a wider issue here though and that’s that prices across the board are likely to increase in 2017. The British Retail Consortium – Nielsen shop price index shows that clothing and footware have just seen the first month on month price rise for over two years and most other non-food categories measured by the index also saw price rises.
There is a general expectation that prices will increase over the next year and certainly currency fluctuations are likely to force this, 2017 will be a year of inflation.
Impact for online retailers
So what does this mean for your business, apart from the obvious that when you’re buying from overseas your product will probably cost your more?
It’s going to become ever harder to compete on price, even those who have hedged their currency or have deeper reserves of stock on hand will eventually have to replenish supplies from overseas. 2017 will be less of a race to the bottom and more of a case of who blinks first and raises their prices. Start thinking about competing on anything other than price if you want to remain ahead of the pack.
Be prepared for courier price rises
On a side note, be prepared to see your courier and postal services raise their prices. Fuel is traded in dollars and currency fluctuations certainly haven’t helped here. I’m going to go out on a limb and say that couriers will start to raise their prices at some point in the first quarter of the year so build some flex into your price strategies.
Royal Mail already have put their prices up for international mail and introducing a fuel surcharge on it too, blaming brexit. I agree to an extent but fuel surcharges are always a stealth tax in my view.