By Gary Cooper
Price rises between five and fifteen per cent have been announced by UK MI distributors, following the ‘Brexit’ vote on 23rd June. Blaming the lower value of the pound against the US dollar, most, though not all, distributors have imposed the increases, also claimed to be reflecting uncertainty over future exchange rates.
Major UK brand owner and distributor Barnes & Mullins is one of the companies that has raised prices, says Sales Director Brian Cleary. “Our margins have been significantly hit, so we have had to increase prices, but we are trying to make them as modest as we can, so we’re eating into our margins some of the time, as a consequence.”
Cleary says that uncertainty about the future is what underpins the decision. “ Every day there’s a new news story that seems to have an impact on currency rates, so we’re doing what we have to do but no more. As a ball park figure we’ve increased prices by ten per cent because that is what has happened to the dollar against the pound in rough numbers. But in some cases we haven’t raised prices by that much where we have a little bit more margin and in some cases we have good stock bought at old prices, so the increases are not across the board.”
Cleary explains that while only a percentage of the products set to cost more actually come from the USA, many, if not most, music products are actually priced in US dollars – so even a Chinese guitar will be affected by pound/dollar movements.
Almost uniquely wearing both retail and distribution hats, Gremlin Music’s Pete McClelland has raised his prices by ten per cent. “When I heard the result I predicted what the currency would do so I immediately raised prices by ten per cent, but with the thought that we may have to add another three or four per cent later on. As it has turned out so far it looks like we got it about right first time, and from experience I think it is going to stay that way for some time”
Gremlin is also an exporter and McClelland isn’t happy about his prospects in that area. “Fifty per cent of Gremlin’s business is in exports – mostly to Europe and though temporarily we will gain, we’re very fearful of losing the free trade we have with the EU. No matter what the prices, if there’s a customs barrier we are just not going to do the same volume of trade as we did previously. I’ve cut my costs already, cut staff back, and we are going to become much leaner as a result.”
Not everyone has reacted similarly. Strings and Things is imposing no price rises at all on its wide range of strings, accessories and instruments, the company’s Alex Byford reveals. “We are not putting our prices up but what we have done is temprarily suspened our quanity discount structure. As the pound stabilises, as we hope it will, then we will reintroduce those discounts when we can – and we are still offering our setttlement discounts, they haven’t been affected at all.”
Unsurprisingly, Byford says retailer reaction to Strings and Things’ decision has been very positive.
Drum and Percussion distributor The Music Shipping Company, though it has raised its prices, offers a unique view on the opportunities offered. “We’ ve emailed all our retailers, implementing what we hope will be some temporary price rises,” says MD Craig Fenney. “In the past distributors used to have some buffers against these sorts of fluctuations but everyone now works so tightly against the dollar that you can’t do that. But we haven’t increased the price of everything – we haven’t increased the prices of products where we hold a lot of stock.
“What’s causing this problem, is the panic,” Fenney says. “A couple of weeks ago we’d got our figures ready, only for the IMF to chip-in with its opinion on the predicted success of Britain and three cents were immediately knocked off the pound.”
But it’s not all doom and gloom – or shouldn’t be, Fenney argues: “Products in this industry are too cheeap anyway. We give far too much away, so I like to see price increases to a certain extent, as long as they are across the board and everybody does the same.”
For a retailer reaction, MIN spoke with a Drew Sinclair at Glasgow’s thriving independent Merchant City Music, who was actually in the process of adjusting his Yamaha prices as we spoke, he revealed. How had the prices affected him?
“I’d say we’re seeing rises of between five and ten per cent. It probably will have an impact on sales but it’s hard to tell as it’s a quiet time of year with everyone away on holiday. Prices have been rising anyway in any case. For example, a Strat, where it was about £800 five or six years ago is probably up to around £1,200 now and that’s a lot of money for an American Standard Strat.”
Off the record soundings taken by MIN revealed two significant things. The first was that few retailers we spoke with were particularly bothered or surprised by the price rises. The other was that the degree of upset on the part of distributors seemed to be directly proportional to the way they felt emotionally or politically about the referendum result. Those in favour of EU membership (and some were incredulous at the result, one distributor with significant price rises in store – not one of those quoted above – depairing of what he felt were going to be the social and political consequences) were particularly negative in their business projections, while those who favoured the UK’s decision to quit the EU were far less inclined to be negative or to have raised their prices so much. Make of that what you will.