When an Irish business is looking at potential markets outside of Ireland, the most obvious choice will always be the UK.
For Liwu Jewellery, the UK market has been a focus for the past year, with one brick and mortar store in London and three online UK based ecommerce stockists. I have attended ‘Meet the Designer’ and pop up events organised by these stockists to promote the brand. Really excitingly, my story and Liwu Jewellery has featured in the UK press. Therefore, the obvious next step would be to do a large trade show to gain more stockists. However, in light of Brexit, as this blog explains, I am giving this some careful consideration.
And so I ponder, why is the UK so popular with Irish businesses? I’ll hazard a guess with the following:
- A large market in close proximity– ease of travel to the UK and low cost of transportation for goods or services.
- The special historic relationship between the two countries, including a sense that the markets are very similar in terms of customer segmentation.
- The English language – let’s face it, many of us Irish don’t tend to be at ease with foreign languages….myself included (I am sure all my long suffering French and Mandarin teachers are nodding their heads in agreement).
- Britain is (currently…) part of the EU single market.
The last reason is now under threat or at the very least in negotiation. So here are four issues to consider when exporting to the UK.
- Exchange rate fluctuations
Last year when the shocking Brexit result was declared, anyone exposed in the UK felt the effects of a weaker pound falling. If you were amongst a group (including me) who set your prices based in or around the exchange rate pre Brexit, we had the sticky situation of either losing margin as a result of lower sales prices or risking a price increase. When margins are tight, this can have unfortunate consequences……just ask some people involved in food industry.
However, exchange risk can be managed and something we in Ireland have always been exposed to especially since we joined the euro single currency. There are also up sides, if you want to launch now in the UK, the cost of trade fairs and travel, is lower now with the stronger euro. Over the years, the exchange rate alone has obviously not deterred any businesses for looking at UK. The main issue at the minute is whether continued uncertainty will cause fluctuations over the coming years.
- Rates and tariffs on Irish imports into the UK
As the UK and the EU hammer out a trade deal, we will get more of an idea if the costs of exporting to the UK will increase. If duties or tariffs are introduced, for tight margin business, a tariff as little of 2/3/5% can have serious consequences. It may damage the profitability of your business. There may be less funds available for investment in areas like marketing which may be key to driving the sales in the first place!
You might say that you could pass it on to the customer and increase the selling price. This depends on your customer and your competition. For instance, retailers in the fashion, jewellery and accessories need at least a 2.5, in many cases a 2.8or 3 mark up from what they pay to what their customers pay. Would the resulting retail price be too much for the end consumer, in comparison to your competition?
When looking at any export markets, you need to be sure of your figures, especially true until you start seeing large volumes.
- UK Customer confidence
I mentioned margins above but if you don’t have sales, you don’t have a business. A key sales driver of a product based business like Liwu Jewellery is consumer confidence. If Britain goes into recession, consumer confidence will certainly be very low. Any uncertainty, even if there is no recession, can cause a lower appetite for spending. Consumer confidence indexes are considered key economic indicators. The current consumer confidence level in the UK has fallen to – 7. You guessed it, a minus is never good!
Speaking from experience as from 2008-2011, I worked as a Financial Analyst for a well-known Irish retailer. I have seen sales fall off a cliff when a consumer confidence takes a plunge. I learnt though when things get a little better or even when people are fed up of not spending, sales go up again. One of the first signs of a recovery is an increase in consumer spending.
With an uncertain road for the next few years, will the British consumer tighten their belts? For example, many Irish people did have jobs and savings when our recession hit but we all rained in our spending. Or just to really put the cat among the pigeons, does Brexit mean they no longer want to buy to products made outside of Britain? I must say that this was not my experience on Tuesday, customers were interested in my product regardless of where it is made.
Consumer confidence in the UK over the next few years, is a point to consider when evaluating your product and the market.
- Ease of travel
At 7:45am last Tuesday, I breezed out through London Stansted arrivals with not even a wave of a passport required! They bring you off the plane on a bus to a special exit. I could see the UK border control for all the other flights as we all raced to the exit for the train.
The Common travel area agreement we have with the UK pre dates the EU membership of both countries. Many people like myself can do a trip to London in one day, fly early, have your meetings and fly back that night. Will border delays, give rise to extra costs for small business? Trust me London hotels are prices are pricey!
This last point of ‘Ease of Travel’ may be a bit selfish but I feel it is relevant! Overall, the UK as the obvious export market are looking less shiny and attractive. I am no expert and I know most people are very optimistic.
But perhaps it is time to take a serious look at the European market as the first port for your business after Ireland. They might be even a better fit for your product or business.
A trade show in Paris anyone??