It’s always a curious experience observing a US election from this side of the Atlantic. Trump’s victory was an unexpected end to what has been a vicious and ferociously fought campaign on both sides, but with it came relief. However, with protests and talk of recounts, it’s clear that the media circus of the 2016 election is far from over. In the midst of this uncertain landscape, many are examining just how such an historic event will affect their chosen industry.
The most immediate effect came when the value of the dollar sharply dropped, striking fear in the hearts of businesses on both sides of the Atlantic. With the pound being at its weakest state in years due to the Brexit vote, retailers were already on the defensive, but when the dollar dropped to join it, opinions were divided.
Mark Mitchell of Crocodile Toys in Cirencester explained the reaction from UK toy suppliers saying “two or three companies put up their net prices straight away, which is unusual. In the toy industry we always set our prices in January and agree to hold it until the next year. For the first time we had suppliers saying they couldn’t absorb the dollar valuation any further and had to increase it from immediate effect.”
However, not all share Mark’s point of view. Paul Martin, UK Head of Retail at KPMG, believes that the fallout of Trump’s victory is not solely to blame for the volatility of the toy market, explaining the multitude of factors impacting UK outlets.
“Retailers have always had to deal with value fluctuations,” explains Martin, “There is a lot of volatility in FX rates anyway, and manufacturers and retailers have had to learn to deal with that volatility over a number of years before we had a Brexit vote or a Trump presidency. The recent political events have served as a magnifying glass and specifically in the UK we’ve had a perfect cocktail of events happening at the same time. We’ve got political changes on both sides of the Atlantic, living wage, apprenticeship levy, business rates specifically for retail and the massive drive of digitisation.”
Sadly, retailers are largely at the mercy of their suppliers meaning that their only course may be to roll with the punches. Ian Edmunds, MD of Toy Master, shares Martin’s scepticism of the ‘Trump Effect’.
“[The exchange rate] has an effect on retailers but the effects on exchange rates so far have only been due to Brexit, not to Mr. Trump,” explains Edmunds. “It’s down to the suppliers, really. By the time it reaches retailers there’s very little that can be done. It’s down to where the suppliers choose to position their price points and what lines they choose to run or not to run. All we can say for certain is that prices are going to keep going up.”
Stuart Grant, Buying Director at The Entertainer agrees that the impact on the UK market will be negligible, saying “the Trump victory has created uncertainty in the money market which could affect the currency but Brexit is doing that anyway so I’m not actually sure whether there is a direct correlation. It’s creating more political uncertainty, but from a UK perspective we already have so much of that it’s unclear what you can attribute to one or the other.”
Regardless of which factors are harming the business of UK retailers, one constant theme is that retailers must adapt to this harsher retail environment in order to survive.
“The UK retail sector is 18% less productive than Germany and 28% less productive than the US,” comments Paul Martin, “Political issues have added on top of some of these challenges but the fundamental challenges were there before. This is a great time to say ‘now is the time to make the changes that can address the issues that have been facing this company.’”
Mark Mitchell of Crocodile Toys believes that changing the focus of his business is the only way he and other independent retailers can survive.
“The only thing we can do is just be much more specialised in what we do so that people don’t recognise those differences quite so much,” explained Mitchell, “I think it’s change or die. “
Whether it’s Trump, Brexit or online retailers, there are plenty of reasons for brick and mortar toy shops to be nervous. However, regardless of your political outlook, it’s important to remember that the toy industry is, by it’s very nature a volatile and ever-changing environment. While challenges are undeniably on the horizon, with perseverance and ingenuity, retailers can endure and thrive.