BREXIT price rises

DollarSaver

I am trying to figure out what I should buy at this time in order to try and minimize the almost certain increases in prices of everything.

Everything we now import has cost more as the pound has fallen so there will be a knock on. There will also be increased prices due to delays and costs associated with temporary use of WTO default trade agreements. I noticed yesterday that my coffee filters have jumped 50p to £1.50 for 40 they are made in Belgium. I assume this is exchange rate related. I have also noted that many products in Poundland have stopped being stocked, ones that came across as very good value. Maybe they can no longer be purchased and profitted from if they are imported from China for example cause of the pounds fall.

Does anyone have a handle on what will increase in price fastest ? And what would be a good general plan.

I imagine bulk buying anything that you use manufactured or imported overseas that is not perishable would be a obvious, basic and sensible move for starters.

I am wondering how and when fuel will start rising as well.

Any input greatly received.

kathrynha

I very much doubt your coffee filters have gone up due to Brexit.
Firstly, the shop will probably have bought them long before Brexit
Secondly, they will have a contract for buying filters that will have been in place for years.
Thirdly, the value of the pound didn't drop enough for that price rise.


I reckon a lot of unethical companies are going to use Brexit as an excuse to put up prices at a level considerably above any additional cost to them, in order to boost profits, and then blame Brexit when people complain

spadoosh

What your descibing is basic economics. Supply and demand.

Its all well and good companies raising their prices but if people dont buy or buy less it effects profitability.

Lets look at mercedes cars for example.

Lets say they currently sell 10 cars a day to the uk @ £500 (£5000 total). If the prices increase by £50 they might sell one less. If they doubled the price they might only sell 2 cars a day (£2000 total :eek:) Now bearing in mind most companies put a healthy margin on their products what do you think is more likely to happen?

Do you think they are likely to try and charge the UK consumer more potentially reducing their total earnings or maintain the price (reducing margins a little) to ensure a higher total earnings?

Its all a fine balance.

Another example take a look at the rest of the world.

India, India is a good example. Now i have an Xbox one. I can buy games through the xbox store, they normally sell for around £59.99 (normally cheaper to buy online or instore). People from india also have xboxes. They can also buy games from the xbox store. Do you think they charge a country thats average earning per person are 10 times less than those in the UK the same? Ill tell you if youre unsure, they dont. Ive bought games that cost less than £15 that are marketed for £60 over here.

Have you heard of Apple? Multinational business. In germany you can buy and iphone for (on average) $727. The very same iphone (with english packaging) in the uk, would set you back $671. In italy, that iphone is $766.

Your mention of exchange rates seems to conflict with the pricing strategies in Italy and in Germany. Im pretty sure the costs involved dont amount to a $39 price difference. Im certain that the exchange rates dont reflect a $39 price difference bearing in mind italy gets (currently) $1.11 for every Italian Euro and Germany get $1.11 for every German Euro.

wotsthat

I don't really know the answer but would suggest the closer something is to being a commodity the quicker the consumer will see an impact on price.

So I'd expect quick changes in tea, coffee, wine, fruit, vegetables, imported electricity, fuel etc. Maybe it'll be muted because currently retailers aren't answering 'phone calls or emails to avoid price increases being discussed so, so far, any increases are being funded from supplier margins but this won't continue.

There are different ways of paying more of course. You'll see less offers on wine - 25% off when you buy 6 - less of those. In general less promotions overall as these are supplier funded.

I've just come back from a trip to France where I purchased 12 months worth of coffee, 6 months worth of wine & spirits, a years worth of washing powder etc. I've saved a fortune even at the lower exchange rate. The UK is far from cheap.

Just a note on Poundland. They purchased 99p Stores and it's been a nightmare for them - they didn't have a clue what they were buying. I heard they hardly made an purchases from any supplier in February as they tried to clear all the crap out of their combined warehouses to clear the decks. The exchange rate change is going to negatively impact them but a few of their problems are self inflicted.

They sell a lot of end of range stock providing a clearance service for other businesses. One subtle change is that companies will be much more careful in managing their stocks so they don't have to offload to the discount sector which is margin diluting.

Spiv_2

kathrynha wrote: »

I very much doubt your coffee filters have gone up due to Brexit.
Firstly, the shop will probably have bought them long before Brexit
Secondly, they will have a contract for buying filters that will have been in place for years.
Thirdly, the value of the pound didn't drop enough for that price rise.

Additionally the Chinese have quietly devalued the Yuan by 6% during Brexit......

mayonnaise

Brexit price rises??
Weren't we told brexit would lead to lower prices?

CLAPTON

clearly a lower pound will lead to increase in the costs of some imported goods: however the selling price in the UK also factors in fixed costs and wages etc so the actual cost in the shops should rise by less than the change in the exchange rate.

wotsthat

CLAPTON wrote: »

clearly a lower pound will lead to increase in the costs of some imported goods: however the selling price in the UK also factors in fixed costs and wages etc so the actual cost in the shops should rise by less than the change in the exchange rate.

That's the theory but subtlety different in practice. Maintaining cash margin is OK but not great as a strategic long term practice because it dilutes % margin.

If Tesco are making 30% on a £1 can of beef in gravy and increase the price to, say, £1.05 because the price has gone from 70p to 75p their margin decreases from 30% to 28.5%.

CLAPTON

wotsthat wrote: »

That's the theory but subtlety different in practice. Maintaining cash margin is OK but not great as a strategic long term practice because it dilutes % margin.

If Tesco are making 30% on a £1 can of beef in gravy and increase the price to, say, £1.05 because the price has gone from 70p to 75p their margin decreases from 30% to 28.5%.

the actual change in price will depend upon supply and demand.

the wish of the retailer to maintain a specific margin will be doubtless be a factor

however, whether the retailer maintain their form margin or not, the percentage increase in retail price will be less than the percentage change in the exchange rate.

nkomp18

I think certain industries like technology will be severely affected.
Some price increases have already happened officially due to Brexit, Links to articles below:

http://www.gizmodo.co.uk/2016/07/tech-thats-now-more-expensive-post-brexit-vote/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+uk%2Fgizmodo+%28Gizmodo+UK%29

and

http://www.gizmodo.co.uk/2016/06/one-of-the-best-cheap-phones-might-get-a-price-hike-thanks-to-brexit/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+uk%2Fgizmodo+%28Gizmodo+UK%29

My advice is getting something like phones and computers before it gets too expensive

wotsthat

CLAPTON wrote: »

the actual change in price will depend upon supply and demand.

the wish of the retailer to maintain a specific margin will be doubtless be a factor

however, whether the retailer maintain their form margin or not, the percentage increase in retail price will be less than the percentage change in the exchange rate.

Yes that's the economic theory but I'm explaining how retailers work rather than how you think they actually work and also pointing out the world works in percentages as well as cash.

Supplier gets a price discussion meeting (6 - 8 months, 30 voicemails and 50 emails after first asking). It's such a ballache they're going to try and get away with 6p rather than 5p - probably end up with 5p and the promise of promotional funding.

The retailer is going to moan and !!!!! about their margin and demand to know what the supplier is going to do about it . The supplier is prohibited from discussing retail price strategy but a charade starts where the supplier shows different margins at different price points. The buyer chooses a price point which (a) maintains cash margin (b) maintains % margin (c) sounds nice.

Supply and demand is a consideration but, for a commodity type item, Tesco will be hearing pretty much the same story from the supplier's competitors. On the consumer side there's not as much competition as people think so the price increase will go through and, if there's a reaction, maybe they bring the price back but put 6% less beef in the can and top up with gravy.

The UK consumer has always been content that supply and demand determines they should maintain Tesco's % margin. Maybe they're catching on now but they've been pushovers in the past.