What does Brexit mean for retailers with international ambitions?
The fall-out from the EU referendum will create new risks as well as global opportunities for retailers and marketing and ecommerce professionals.
The retail industry is on the global march. More than one in four international retailers have targeted expansion into Germany, France, the UK, China and the US in 2016. These findings, from a survey by property consultants CBRE, also show that markets such as Colombia, Egypt and the Philippines are attracting attention. Will Brexit speed up or interfere with such plans, and how can retailers ensure they manage their recruitment needs in this changing global marketplace?
Trouble ahead for UK retail?
The impact on individual UK businesses will vary depending on costs and sector, explains Verdict Retail consultant Andy Hall. “There will be opportunities for some retailers – for example, luxury brands such as Burberry may gain from the weaker pound. For other retailers, freedom of movement and currency volatility will make a significant impact. Sports Direct, for example, is likely to take a big hit in the upcoming financial year as its currency hedging policy failed to take account of the strengthened Asian markets.”
Making the right appointments is never more important than in troubled times and Charlie Fey, Director of Commerce & Industry Carter Murray, is confident that there will be plenty of opportunity within UK retail marketing and ecommerce. The British have always been hailed as leaders when it comes to retail and my understanding is that the lion's share of the brain power in the sector resides in British heads. So unless there is a mad rush to emigrate I think the status quo will remain. Shop floor may be a different matter but that is outside the scope of our expertise."
Asked if the decision to leave the EU will encourage UK retailers to increase their focus on markets beyond Europe, Fey says: “I am not convinced. If the opportunity is there now it was likely the same opportunity as pre-Brexit and if it was good enough they would have taken it already."
Global retail growth
Ray Gaul, vice president of global research and analytics at Kantar Retail observes that many UK retailers already have a global vision. “The challenge for UK retailers looking to expand abroad will be that the domestic market needs to be supportive and strong. In the short term this will not be the case, which will discourage them from going beyond Europe, but in the long term it would certainly help if they continue to think globally.”
Hall says Brexit is likely to cause retailers to reassess all their overseas operations. “The changing landscape in Europe will mean many retailers will take the opportunity to closely examine their international efforts, especially as currency fluctuations will not just be affecting European operations.”
However, Kantar Retail is predicting 20% annual growth for modern trade in over 50 countries, primarily in Southeast Asia and Africa. Modern trade is the process of replacing traditional trade (wet markets, bazaars, wholesalers) with shopping malls, shopping centres, out of town superstores and convenience stores.
Gaul suggests that UK retailers are well placed to win business in the likes of India, the Philippines, Nigeria, Kenya, Tanzania and Bangladesh due to historical connections and local understanding. Sophie Marshall, Senior Consultant at Carter Murray’s Dubai office, would add countries in the Middle East to that list. “We’re seeing expansion in retail right across the region. There are no signs yet that Brexit has dampened the appetite for growth and many global brands will undoubtedly see it as a reason to expand or diversify their portfolio.
“From a recruitment perspective we would expect to see an influx in retail candidates from the UK looking to make the move out to the Middle East,” she continues. “Dubai especially has always been an attractive place for international retail candidates because of the international brands and department stores that have been set up here as well as the competitive tax free salary and benefits. Other countries, such as Qatar and Saudi Arabia, are growing their retail industries significantly with new malls featuring luxury brands opening every quarter. Not only is the Middle East positioning itself as a retail shopping destination but it is also investing and buying retail businesses from the UK and Europe such as BHS (Al Mana), Balmain (Qatari fund Mayhoola) and Corneliani (Bahrain’s Investcorp).
Having spent 6 years working in the region, Sophie knows the retail industry professionals extremely well. “There’s certainly no shortage of opportunity for strong retail candidates in the Middle East, and market indicators are looking positive at the moment.”
Andrew Rouse, Head of Carter Murray Australia, meanwhile, says: “Without understanding global macro economic theory past what I see in the news, the markets offering the growth opportunities haven't changed. Asia is the obvious case in point. Whilst there is a lot of emotional and heated airtime being given to Brexit there will be vast areas in the Asian markets that it is difficult to see being affected in any way.
Post-Brexit changes to UK staffing
Uncertainty around Britain’s departure from Europe will undoubtedly create global opportunities, but British-based retailers will face a period of uncertainty that could impact the market and blue-collar recruitment decisions.
While the UK will remain a member of the EU for at least the next two years, it is essential that businesses plan for the post-Brexit retail environment. RetailNext European retail consultant Caroline Burke says it is critical that productivity can be measured and that staff are aligned correctly to meet the needs of the business.
“In the short term, retailers need to have reassurances about the status of European employees already working in the UK and vice versa,” she explains. “As we begin to understand the impact on freedom of movement, retailers will be pushing for clarity on the definition of ‘skilled labour’ - the unskilled lower paid labour in distribution and warehousing will be a worry in terms of overall payroll costs.”
Hall agrees that future immigration policy will be at the forefront of retailers’ minds. “Europe has supplied the industry in the UK with plentiful labour. As we do not yet know how immigration policy might differ from the current position it is difficult to work out the details of how specific retailers will be affected, but it remains a concern for larger retailers in particular.”
Many retailers have begun to outsource logistics to professional companies that specialise in elements of retail, which range from stocking shelves to delivering ecommerce packages, adds Gaul. “Brexit will encourage these businesses to outsource these activities to a greater extent and then upskill existing staff to higher level activities ranging from customer services to data and analytics.”
Worldwide retail marketing and commerce opportunities
Social Market Foundation data indicates that approximately 6% of UK workers in the wholesale and retail sectors were born in the EEA (European Economic Area), but that only around one in six of these workers are employed at management level. Professor Joshua Bamfield, director of the Centre for Retail Research, suggests that a points-based immigration system could help retailers recruit specialists from all over the world.
That’s certainly a future that Andrew Rouse is ready to embrace. “We already work as a truly global organisation, dealing with retail marketing and commerce professionals from all around the world. With our network of international offices we can operate without borders. If Britain makes it easier for non-EU retail professionals to find skilled jobs in the country, then we’ll be very well positioned to take advantage of that by bringing in talent from the Asia-Pacific region.
And Rouse can even see benefits to a slowdown in the UK economy. “Recessions can be good times to pack your bags and gain international experience,” he explains. “Weathering the storm in Hong Kong, Singapore or Sydney can be a great way to add to your skills and develop your CV.”
The future is uncertain for Britain and for its economy, including retail. What seems clear is that retailers who take a global view will continue to discover opportunities, both for their business and for the marketing and ecommerce professionals who will drive their success.