Even for UK-focused retailers, events thousands of miles away have an impact, says David Wild
Recent news has catapulted world affairs back into the headlines. We’ve seen floods in Australia, an earthquake and tsunami in Japan, political change in Egypt and civil war in Libya. These events concern us in humanitarian terms. How much though do they affect our strategies and plans?
Winning in retail means understanding what local customers need. Since our customers are rooted in this country it’s tempting to believe that what happens here is what’s important.
Research on the influences on shopping decisions supports the thesis that it is factors close to home that matter. Our purchases are more often guided by the recommendations of friends and celebrity trends. The X Factor seems closer to the nation’s heartbeat than Colonel Gaddafi.
The truth is, though, that while retailing has been an essentially national business it is now much more outward looking. Companies like Tesco, Kingfisher, Dixons and Debenhams all have large parts of their businesses abroad. In the case of Walmart and Lidl there’s also been significant inward investment into the UK.
In addition to our store footprints, our sourcing programmes are now truly international. Our transition to a fully globalised industry like car manufacturing or food is clearly under way. World events shape our businesses and the behaviour of our customers. We can’t ignore what’s happening beyond our island and we know it.
A good example was last year’s Chinese New Year, a national holiday in a country thousands of miles away. China is an important hub where we source products across our ranges.
Last year some of our manufacturers struggled to keep to their schedules. Staff hadn’t returned after the new year’s holiday, preferring instead to join one of the nation’s public work programmes.
This caused disruption to the flow of goods to our stores. This year, armed with that experience, we planned ahead, bringing in inventory earlier and building up buffer stocks against potential disruption.
Likewise the Japanese tsunami has sent ripples around the world. In our case it affected some suppliers that rely on components manufactured in Japan. We have compensated by identifying supply issues and amending plans accordingly.
Another world issue directly affecting our customers is the price of car fuel. This was already a significant factor in family budgets before the recent issues in the Middle East and North Africa. Since the start of the civil war in Libya they have risen a further 10%.
Customers are trying to save money by driving less and that’s changed their shopping habits. In our case, it’s dampening the demand for car servicing as motorists take longer to clock up the miles between service intervals.
It’s no longer enough to be an observer of the world stage. We must be proactive; monitoring, planning and reacting to the global news agenda - something we are all doing on inflation, much of which is imported because of rising prices in our supply chains. The cost of raw materials and labour are affecting the cost of goods we are buying, plus the rising prices of fuel and shipping.
So world affairs are firmly back on the agenda. Our fortunes are linked to global events - be they natural disaster, political unrest or even public holidays in China.
David Wild is chief executive of Halfords