"The party is over"
I have just returned from visiting relatives Down Under and was very much struck by the high cost of goods there, a significant change from my last visit there when Australia had seemed cheaper than here. My family over there were not aware of there having been big price hikes and I realised that the disparity was not due to a change in Australia but rather to the effects of five years of price erosion back at home.
The UK consumer has benefited from a strong pound, low Chinese labour costs, and the competition from supermarkets to the point that prices here are now artificially low.
But the party is over. Although the immediate future will see prices attempt to be pegged by further squeezing of margins this will not work with lower volumes and cannot be sustained.
The economic facts of a weak pound, rising Chinese labour costs, future inflation (inevitable as a result of the hugely increased money supply) and higher transport costs (oil won’t be cheap for much longer) means that the UK consumer is going to be forced to accept significant price increases in all goods going forward even without the retailers moving back towards sustainable profitability.
Perhaps next time I visit the folks, Australia may seem a cheap option by comparison.
Jonty Chippendale. The Toy Shop, Cockermouth
"Know your customer"
Pricing is the foundation of margin and turnover. A price point was created by bosses to ensure honesty from employees. At £4.99 a customer will wait for the penny change. Computer EPOS tills changed the reasons for price points and High Street stores competed by going to £4.95 to be cheaper, and the internet is even stranger.
As an independent retailer I can’t take into account the RRP on branded product . I have to go with the advertising and special added value and customer requests. Stock turn is the important topic on branded product.
I need a margin to pay my bills but I am a specialist in toys with so many square feet. I need to have certain lines and with Woolworths gone my issue is space. Why should I stock more branded goods at a lower margin when I am already making a good profit?
The demise of Woolworths has altered the business module for any shop that was competing with it. We have new customers coming into the shop wanting TV-advertised toys at lower margins for me, but now we have some stock turn. As an example our store used to be 20 per cent branded and it’s now 35 per cent as we have increased what ranges we could but also increased our other higher margin product ranges. The toy trade reports 15 per cent down in sales most high street shops that used to compete with Woolworths are 15 per cent up on a five-year average. Our average sale is down to £8.50 but we are serving 5,000 customers a month 800 more than last year.
We all need to make a profit, why don’t the manufacturers cost and sell at the price they need to make a profit for everybody and give discounts for quantity purchased and retros for achieved purchased targets on ranges? The likes of Tesco don’t care about the toy industry but the toy industry want to sell to them. So give the independent retailer a point of difference and reward them for stocking the range that the customers want as well as the high profile TV-advertised lines. Flair gives a great service and product and offers a range margin, that pays the bills and makes a profit for all that stock the range or specific lines.
Consumers have not changed. They want value for money for the products they buy and service they receive. John Lewis has the right idea - never knowingly undersold. We give the same promise in our own way, we don’t stock items we don’t make a profit on but we don’t have time to find out what everything is sold for. Customers are never shy in asking for a matched price and we match if the competitor has it in stock. Anyone can sell a product at a loss if they don’t have it in stock.
I am highly opinionated about the problems created by mis-selling and unfair trading within the toy industry and all I ask is for the suppliers to use a bit of common sense when supplying toys to shops that don’t rely on toys for their profit, toys are used at Christmas by larger retailers to drive customer footfall and we have to accept that reality. But we don’t have to stock anything that we don’t make a profit on but I do expect my supplier to tell me in advance if they know.
The independent toy retailer should be the backbone of the toy industry through Toymaster and AIS larger multiples have their own buying power and can achieve good profit from low margins and are even more important, we all do different things and trade in different ways but we all have to make a profit by trading with different consumers with very different needs.
The old saying ‘know your customer’ is the most important business strategy for any business or toy retailer.
Mike Arnold, Toywizz, Chichester
"We can't absorb it"
Suppliers have put prices up a lot this year and we can’t absorb it any more so have had to put up a lot of our prices. I resisted last year when things were tough for us. Everyone else more or less seems to be doing the same so we are not alone.
We are doing very well this year, being on average 50 per cent up on last year and putting prices up hasn’t affected anything. We still have offers and sale items for people to take advantage of and try and stock enough lower prices items to cater for everyone. I don’t think many suppliers are eroding margins as they are trying to support us retailers, they seem to need me now Woollies has gone strangely enough.
The toy industry seems to be the only industry that is putting prices up but with everything coming from abroad and the price of plastic and metal being high this was inevitable.
Jacqui Lea, Jac In A Box, Macclesfield
"More of a slog, less of a jog"
We are new to the toy scene and our web site is still in the process of being built (hopefully up and running by about August time), but in my current company is facing the same challenges that you are.
We have had increase on some of our products by over 40 per cent. It is very difficult in this current climate to increase our customers prices by that amount. The effect is that we are now absorbing some of the cost and our profit margin has been driven down considerably. But at least some of our customers have taken the price increases on the chin even expecting them.
We take about twice as many orders now than we did two years ago, that’s at least three per cent less GP over the year, but takes twice as much work.
We cannot absorb any costings for deliveries, (which costs us around £27k per year) and all the employment/maternity laws, red tape and legislation, makes what used to be a joy to come to work, especially my own business, now becomes a necessity to come to work.
Wholesalers throughout all industries are now insuring their creditors, which means smaller companies quite often have their credit limits reduced, or even worse, some wholesalers in our industry are now requesting direct debit payments for credit accounts. With customers taking longer and longer to pay, day to day running of the business becomes more of a slog and less of a jog. Only being a small company employing eight people I get more hassle from staff than I do from customers.
The advent of the internet on most levels is a good thing, but when we have customers that can buy cheaper than we can, at less than dealer prices, it becomes very difficult to explain to them that the products may not be what they seem, the market for all things now is cost driven, high customer service is expected from less than civil customers, with free delivery and free returns. I think that what is a problem in one industry seems to be a problem in all industries.
Tracey Asbury, Toydaddy, Oldbury
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