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Analysis: UK's global online players to benefit from Brexit

UK retailers with a strong international online presence may benefit from Brexit as the weakness of sterling makes British firms more attractive in the global market.

Missguided bridal

Missguided bridal

Missguided’s bridal range

Despite the uncertainty following the UK’s decision to leave the European Union, as the dust begins to settle some industry experts see an opportunity for British retailers, etailers and brands abroad.

When the result of the June 23 vote was announced, the value of sterling fell by 11%, slumping to a 31-year low against the dollar of $1.32. It had fallen further to $1.29 as Drapers went to press. This compares with $1.48 before the result was revealed. While this may push prices higher and squeeze margins for businesses buying products in dollars, there is a silver lining for British exporters.

“We have been able to revise euro pricing downwards to reflect the lower value of the pound for autumn 16 and even more effectively for the spring 17 season,” says Andy Tompsett, head of UK for British menswear brand Merc. “The winners will definitely be the European markets, such as Spain, France and Italy, where Merc is very strong, but also Russia and Asian countries, where the brand has a loyal following.”

Tompsett adds that Merc had a “record number” of online orders from international markets over the weekend following the EU referendum, which he says he was not expecting but finds “extremely encouraging”.

Merc spring 16

Merc spring 16

Merc spring 16

Sean McKee, head of ecommerce and customer services at footwear retailer Schuh, says retailers must use the fall in sterling’s value to attract overseas shoppers: “In the short term, the weak pound will give UK retailers with an online presence an opportunity to sell more to an international audience, as product is effectively cheaper for them. It’s a time to capitalise on non-UK customers.”

Michael Ross, co-founder and chief scientist at ecommerce solutions provider Dynamic Action, says British retailers with a robust online presence are likely to emerge from the post-Brexit fallout relatively unscathed. “Those with a strong online business and global customer reach will be able to manage the risk more effectively,” he explains.

“Asos, for example, does very well internationally when sterling is weak. When [the pound] drops, it makes the UK an attractive place to shop for international consumers. You need to be able to switch on marketing in those regions to take advantage of it.”

Another etailer that has been making waves overseas and intends to further its global reach following Brexit is Missguided. Chief executive Nitin Passi says: “The business will continue to look to exploit more international territories and increase our exposure in those markets. The short-term effects [of Brexit] are that our imports are going to cost us more. However, our international presence means the increased cost of imports will be netted against what we are earning in other currencies.”

Changing priorities

Verdict Retail analyst Nivindya Sharma says boosting international sales must become a focus for UK businesses: “Retailers have to prepare for some sort of a sales slowdown as UK consumers restrict spending. In this situation, boosting sales from international operations should become more of a priority. Those with local language websites in various countries will see the most advantage, as they can then target consumers in those countries more directly, while running local promotions and marketing campaigns, and capitalising on local events or national holidays.”

She adds that local fulfilment will be an important area to consider, as costs for fulfilment from the UK could rise.

It is crucial to act quickly, says Orlando Martins, chief executive and founder of Oresa Executive Search: “We may be in for a rough ride, but we should remember the tech industry we are now intertwined with was born out of the very notion of ‘disruption’. Our hope is that retailers will make opportunity out of perceived adversity and use this as a platform for long-term growth.”

Asos, Missguided and other retailers with a strong online presence have a greater ability to make decisions quickly, points out Martin Newman, founder of multichannel retail consultancy Practicology. “If they want to focus on France or Germany, for example [to make the most of the weaker euro], those with well-developed technology and local language sites will be at an advantage. The downside will be lower margins, but it’s a way of stimulating demand when the home market is more subdued.”

“Reacting quickly is key,” affirms Ross. “Businesses that are flexible are in a stronger position. Decision-making needs to happen in hours and days, not months. When the exchange rates are moving so quickly, businesses need to take advantage when they can.”

Ross also advises retailers to invest in updating legacy technologies. Pressing pause on digital innovation or investment at a time of uncertainty may boost cash in the short term, but it’s a false economy as they are just “kicking the can down the road”, he concludes.

“The world hasn’t stopped overnight. Consumers are still spending, and in a climate where some firms are very cautious, there will be opportunities for the bold.”

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