VIEWPOINT
CAN GARDEN PRODUCT SUPPLIERS CONTINUE TO SHOULDER RISING COSTS? VICKY NUTTALL DIRECTOR OF GIMA More than a year on from Brexit, there’s one thing that unfortunately we are all now forced to agree on. Costs have risen for us all, and although suppliers have been able to absorb most of these for the last 12 months, to continue to do so could have a detrimental effect for the entire industry. As suppliers get ready to launch their new ranges, packaging, point of sale and marketing campaigns ahead of the 2018 season at Glee, it’s proving increasingly challenging for GIMA members to provide the market with innovative new products without the associated rising costs. Figures released to members from the GIMA Barometer of Trade, which provides overall market analysis through information supplied via GIMA members, points to an entirely unavoidable state of affairs for the industry. Now in its third year, the latest edition of the Barometer of
Trade highlights alarming trends in percentage increases for all base costs. Raw materials have increased by an average of 5% since the beginning of the year, on top of an average of 7.65% in the latter part of 2016, making a cumulative increase just over 13% in the last 12 months alone. This ongoing increase could potentially have a negative impact on the development of innovation, with aspects such as packaging, product size and colour becoming the new benchmark for ‘innovation’. ‘Safe’ products that do little to stimulate shoppers’ interest in the sector as a whole could also become more prevalent if costs continue to keep rising at the same rate. For those members importing goods into the UK, freight costs have also increased another 5% during the first half of 2017; that is on top of the 5.2% increase in the second half of 2016. Landed rates are also causing concern
with a staggering 17% increase in the last 12 months. Together these two costs will put pressure on freight and logistics services at peak times. Within just this first half of the year, labour costs have continued to rise, up a further 4.5%, already outstripping the 4.40% increase experienced in the latter part of 2016. Although some of this can be simply attributed to an increase in minimum wage – and the living wage as introduced in April 2016 – the exchange rate still has a part to play as workers from the EU and other countries look outside the UK for more lucrative seasonal working locations. Admittedly this rise will also be prevalent amongst retailers too, but this only means a doubled increase – something that has to be passed onto the consumer. For the past year suppliers have made efforts to absorb some of these cost increases themselves in order to manage
There will be lots to discuss at Glee this year.
48 September 2017
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retail selling prices, but in the long term this of course cannot be sustained. However, as the Barometer of Trade also deals with opinions and qualitative data, the reports are offering a great source of optimism. During the first six months of 2017, the majority of respondents – 63% – said they expected some form of improvement, and a further 20% expected prospects to greatly improve. This isn’t just wishful thinking – more a demonstration of the faith that suppliers have in their retail partners to understand what needs to be done to keep our industry moving forward. We also exist within a fairly buoyant market sector, continuing to be valued in excess of £5billion annually. Garden centres continue to thrive as retail and community hubs, and the diversification of product sectors and retail offering is helping to maintain continued growth across the board. Despite the challenges we all face, there is still a marked determination to break through and make the changes that will help safeguard the industry from being left behind by others that are better organised. Whether or not that happens through price increases, taking orders earlier, sticking to buying commitments or simply sharing information that can help us all – I believe that together we have the ability to make these changes, now before it’s too late. 4The Barometer of Trade relies on a wide variety of information given anonymously by participating GIMA members. If you are interested in getting involved in the reports, contact the GIMA office on 01959 564947 or info@gima.org.uk.