Daily Times

“I really shop when the pound falls in value,” says American Jian DeLeon.

The 31-year-old editorial director at online US fashion website Highsnobiety is unsurprisingly passionate about clothes. He says his favourite luxury brands are now substantially cheaper in London.

“Like anything from Comme Des Garcons. I got a jacket last time I was there for 40% less than I would have paid here,” he says.

Before June last year, when the UK voted to leave the EU, he rarely went shopping on his regular work trips to the UK. “The littlest things from a pint at the pub to a short Uber ride were murder on my bank account because of the exchange rate.”

Now that some brands are significantly cheaper, he spends about $350 (£274; 310 euros) each time he comes, but thinks the favourable exchange rate means he saves around $100. “It’s easier for me to splurge and sometimes I do it too much for my own good,” he confesses. Mr DeLeon isn’t the only one indulging.

Just over a year on from the EU referendum, the pound is still around 16% lower against the dollar.

The weakness has lured over a flock of international tourists hungry for high-end brands at relatively bargain prices. Payments firm WorldPay says non-UK consumers’ card spending at department stores rose by a fifth in the first three months of the year, while spending on electrical goods rose 22.7%.

US shoppers like Mr DeLeon have been amongst the biggest spenders, splashing out an extra 21.5% on their cards during the same period, it said.

‘More for less’: “The extreme currency fluctuations encourages shoppers to buy more,” says Honor Strachan, principal retail analyst at GlobalData.

“They’re getting more for their money.”

But how do companies manage this kind of discrepancy; with precisely the same product priced significantly differently depending on where in the world it is bought? After all a boom in revenues in one market, can seriously dent demand in the markets international shoppers are coming from.

Many of the world’s most famous brands – such as Burberry and Apple – simply raised their UK prices to try and make sure what they sold cost broadly the same across their international markets. But luxury footwear brand Crockett & Jones, which has 12 stores worldwide across locations including London, Paris and New York as well as global wholesale partners, says it has deliberately left prices unchanged.

“The last thing we want to do is abuse our customer confidence and raise prices in the UK.

“We certainly don’t increase our prices at a whim to take advantage of said currency fluctuations,” says James Fox, export sales director at the firm.

Mr Fox believes that in the long term it’s best to keep pricing simple.

“We strive to have a level playing field as and where we can.

“We offer sterling, euro and dollar price lists, which gives our customers piece of mind that they are buying in their own currency at a level price to the potential competitors within their market.” He says generally any discrepancies tend to average out across currencies, and that re-pricing is only possible “once or twice a year” due to the upheaval it causes for the business overall. So is he concerned that the firm could be losing out financially?

“We are fortunate to be in a position that we have a few very strong ‘Brexit proof’ markets which underpin the company when the UK is trying its best to screw up international trade,” says Mr Fox. By selling both through its own stores and through wholesalers the firm’s risk is already spread out, he adds.

Crockett & Jones is not the only retailer which has kept prices steady.

Ray Clacher, executive vice-president at Trinity – owner of premium brands Gieves & Hawkes, Kent & Curwen and Cerruti 1881 – says non-EU tourists using either the US dollar or a currency that trades in line with the dollar, have driven up sales at its London stores.

Nonetheless, these sales are still just a small percentage of Trinity’s total revenue. “We certainly have not adjusted our retail prices to reflect the influx of tourism, in fact, quite the opposite as we want to encourage more UK [sales],” he says. However, he admits this strategy could change if costs continue to rise.

“If inflation continues to rise and sterling continues to struggle against the euro and dollar, we will have no choice but to pass on the cost to our customers – but not at present,” says Mr Clacher.

But it is also important not to be too greedy. Many US retailers that have come to the UK have simply swapped their dollar signs on their US price tags for pounds – betting that British consumers will be willing to pay a premium for their goods.

Banana Republic is one such example. After eight years in the UK, it announced last year it would close all eight of its stores. The decision followed six consecutive quarters of falling sales.

“They thought that because they were a big brand, they could demand higher prices.

But UK consumers “are savvier than that,” says Ms Strachan.

Yet for retailers doing a straight currency conversion from their local currency to the country where they are selling their goods also doesn’t necessarily work.

“Asos made a big thing about launching local websites with a straight currency conversion and it didn’t work – local pricing didn’t fit in line with competitors. “Brands need to look at who else is operating in that space, the wealth of consumers there, and what they’re willing to pay, and then price accordingly using localised pricing structures,” says Ms Strachan.

Many firms, particularly larger brands such as Hermes also use currency hedging to protect themselves. This involves working with a bank to buy currency at the current rate to protect themselves against adverse future volatility. In the end, though Ms Strachan says a company’s ability to cope with currency volatility comes down to how much people want to buy what they sell. “If they still want it customers will buy it,” she says.

Published in Daily Times, July 3^rd , 2017.