So, Brexit, that's a thing! This is part three of a possibly-never-ending series of articles about being a business in Brexit Britain. Part one was pre-Brexit, here. Part two was the immediate aftermath, here, in which we develped our badly drawn brexit boat. Then I got on with some work while all our political parties went nuts for a few months. Welcome to part 3, which is inexplicably about Marmite.
Marmite was big news last week, as Brexit chickens came home to roost and horror of horrors, it vanished from some supermarket shelves for a while.
Now, I'm going to have to explain some background here for folks new to this, sorry regular readers.
1) The purpose of businesses is to make a profit, not to provide a service or a product. It's easy to forget this because none of our market ourselves as profit-making-machines.
2) Our country, the UK, voted out of the EU several months aback. Even the people in favour of this agree the actual process is a tiny bit messy, and our currency is falling against tthe US dollar and the Euro as a result.
3) Marmite, like KMD, is culturally British, and notoriously you either love it or hate it. I happen to hate it, my flatmate loves it, hence I have a jar. I'm a big fan of their marketing either way because seriously, who wants to be bland?
4) Last week in the UK the big news story was that Unilever (large overseas corporation that owns a shedload of products and brands) was in a fight with Tesco (very successful British supermarket) over prices. This fight ended up mostly about Marmite because its a product that holds a special place in our hearts, and also because its made in the UK, so that confused people immensely.
If it's British and it's made in Britain why would a fall in the currency mean the price goes up?!
I don't have any interest in either Tesco or Unilever so I can't promise you that any of this is accurate, but I can extrapolate from our experiences here at the teeny tiny end of business in the UK because hey, why not!
To follow my argument, you're going to need to understand what "fall in the currency" means. If you already know that, skip to the next picture because this paragraph will be really dull.
National currencies are traded on money markets which are quite frankly, things I don't fully understand, though happily neither does anyone else, which is why they do things we don't expect. What we do know is that they don't like uncertainty and at the moment, no-one know what conditions UK companies will be facing in about two and half years, which means anything you do in this country could end really badly. This means no-one likes us much, business-wise, so our currency isn't worth as much as it was when everyone knew, more or less, where we stood and what we were upto. Obviously it's a billion times more complicated than that but we could be here all day. Fight it out in the comments if you have passionate forex opinions.
I'm going to round the numbers to keep the sums easy, because sums are not my strong point. Let's use the US dollar - British pound (GBP or sterling) as an example. Pre-voting, you could get about one and a half dollars from the bank for your pound. If you take them a pound now, you'll get more like one dollar and 20 cents. So if I was buying something that costs $15, pre-brexit it would have cost me £10. Now it would cost me £12.50. That's effectively a price increase of 25%. And that's what "The British currency has fallen" means; it means when we buy things in other currencies, they cost more than they used to.
In real life of course, there are also banking fees, minor fluctuations, occasionally good deals from organisations who may or may not have gamed the system effectively, and a variety of really complicated corporate fiscal sheninigans that companies get up to to protect themselves from unexpected 25% price increases.
Silk tap pants by Ayten Gasson, Demi-Corset by us.
So how can a British product end up affected by things costing more in dollars and euro? Here's just a few possible ways:
1) The company that owns the product is overseas. If you're paying them in pounds, where they were getting £10 from you, they were making $15, and now they're ony making $12.50. So you're paying them the same amount but they've just taken a huge cut in prices. That can be a bit awkward.
2) It's very rare for a company, even one as little as us, to individually price everything up and negotiate each price seperately. The most obvious example of that is bras; we sometimes do 27 sizes and believe me, they do not all come out the same price. But we don't charge a different price on every size. We average it out. Unilever was, by all accounts, negotiating an overall price increase across thousands of products, regardless of individual variation.
2) Made in the UK doesn't mean everything in it is British. The silk knickers in the picture above? wholly made in the UK; but you can't make the silk they are made from here. Silk, like most things, is imported, because we're just not that big of a place.
BUT WAIT, I hear a bunch of you saying, Marmite is mostly made from a product left over from making beer (now there's a booming UK industry), so if the core ingrediant is British and it's made here surely the price is based on the British currency and can't be affected by overseas issues.
Well, no. Even in lingerie the price of a product is not mostly about its core ingrediant (fabric) or just the cost of that plus the labour to make it. Into that are a pile of hidden costs; in food, the processing and the packaging are pretty major components. Now, the chances of glass jar, labelling and plastic lid Marmite comes in being British are pretty much zero. We just don't botther mass manufacturing that stuff here anymore, everyone outsourced it to cheaper countries years ago. Which means that's going to be prices in, most likely, US dollars, or possibly euro. It also seems deeply unlikely that we're using locally sourced British sea salt for that extra kick; a quick google says most catering supplies of salt come from the US and China, both of which charge in, you guessed it, US dollars, as do the importers who would ship it here; though it might be bought from a distributer here who passes on the prices in pounds, ultimately it will have gone up.
You may have noticed, by the way, that there's a lot of hauling stuff around in this. Getting ingrediants or components around the world to the place where you assemble them, and then getting that product back out across the country or globe is a hidden cost in every product. Travel costs are based on the price of oil which is, you guessed it, priced in US dollars.
Oh, and long term? As with industrial sewing machines, it's highly unlikely that the equipment used to churn enormous vats of tasty, tasty and/or revolting marmite, depending on your experience, were made in the UK, or can be replaced by UK equipment. Repairs, spares and updates are going to cost more.
And that, my friends, is one of many, many reasons why we weren't impressed by Brexit. Because when you spend pretty much every day shifting stuff about in order to come up with a finished product, you get to learn very fast that the UK is a pretty small island that doesn't produce many of the things key to modern living standards, and that is really quite awkward if your currency starts sliding down about like a stocking from a broken garterbelt.
Hopefully, the government will anounce plans to completely revamp our industry to fix this, but its going to be a long slow slog because we've pretty much dismantled maufacturing stuff in the last 30 years in the UK. In the meantime, over the course of the next few months, expect price rises of anything from 5-30% on . . . well, pretty much anything, really. I believe the President of the EU recently suggested that we cannot both have our cake and eat it, and it would appear he might actually be right.
Relevantly, the UK has only a handful of lace manufacturers left, all small-scale (which to the best of my knowledge all use threads from overseas), two elastics factories (ditto) and precisely no-one making metal suspender bits, and if it did have one we'd likely need to import the ore to get the metal to make them from!
This week we announced a complete site revamp for Hepburn and Leigh, which I suspect made many of you go "who? what? why?"
So here's the story!
About 7 years ago, the entire business was wholesale - selling KMD goods to retailers to sell to you.
There were a few problems with this, mostly because of trying to predict what would sell, which you can never do exactly and always end up with some things that no retailer bought (and other things everyone whinges because you ran out of). Plus, one retailer counted for about 30% of turnover, which was pretty worrying - they were a small website run by a couple so if anything happened to them KMD would be in trouble. But, at the same time, we were still in a market where brands just did not sell direct to the public, and retailers would get very, very annoyed if they started and potentially stop buying.
An early image for Hepburn and Leigh By Nicole from The Hourglass - the L'Amour corset with Lulu and Lush frilly knicker.
So, as you've probably guessed, I set up a seperate retail site with a different brand name. Now, I'd previously been part of an online stockings retailer (yes, I know, my career is very odd, why would a counselling psychologist with specialisms in eating disorders and domestic violence also do stockings retail, but that's a story for another day!). So the site focussed on that group at the beginning. All things retro, vintage and stockings related, lots of multi-strap suspender belts and big knickers and 100% nylon fully fashioned stockings.
We used to photograph other brands with our suspenders - on the left, a Toucan print fuller bust bra set and our Van Doren 6 strap, on the right, a set from lovely French brand Rosy with our ivory boned belt.
In due course, that main retailer I was worried about did indeed give up (babies and swimsuits being more compelling thans bras and suspenders, ultimately), and I shifted KMD to direct retail. That was when things started to get interesting. I'd spent years being asked about competitors and dealing with retailers who thought any other website was eating into their sales, especially if anyone ran a sale or promotion.
And yet, I found that the two sites had almost no overlap, even as its shifted from selling less retro and stockings stuff and more boudoir and fashion styles. Survey after survey and all the data we could look at showed over and over that the customer bases were very different - notably, Hepburn and Leigh's was significantly older, say in their 40's and 50's where KMD's is 20's and 30's. Price promotions on one had no difference on the other. Things we did that boosted sales on one would make no difference to the other, and competition ideas that worked brilliantly would one site would flop horribly for the other. Now, rationally, this makes sense; there are billions of people online, so why would small retail outlets compete with each other? Any why would they compete more than with whoever dominates our own market (M and S in the UK, VS in the USA, for the record)? And yet over and over we see small retailers getting very cross about things - especially in the USA where there's actually an organisation purely to combat suppliers selling direct to the public - rather than, say, getting together and having a good go at kicking VS's arse.
Another Rosy set with the Vargas longline girdle and stockings that somehow never quite got produced! Styled and shot by Morgana.
So here's where we at now; Hepburn and Leigh will be the permanent home for any of our guest brands and the interesting brands we work with who want to be on there, a space for independent brands.
And I'll still be using it as a not-so-sneaky way to test our software changes, promotions, and whatever other shenanigans we're up to!
Lexy is wearing Elila, a US brand who do some amazing products up to a K cup (though, if you're a US customer - cheaper to buy in your own country!)
Join us any time to meet new brands and fresh styles - and for this week, there's also a 20% off code, newsite20. If nothing else it's worth giving it a whirl because I'm planning to bring KMD itself over to this shopping platform as soon as possible, so if there's things you love or loathe about it I very much want to know!
Anything you notice? brands or products you haven't seen before? Can you find the search function? Let me know in the comments!