Essential Retail's View from the Top is a regular series of interviews with executives operating at the heart of the retail technology industry. This week, the focus of the feature is Rupal Karia, managing director for retail and hospitality at Fujitsu UK.
UK retailers Sports Direct, Carpetright and Dixons Carphone are among the retail organisations to have publically voiced their views on their country's decision to leave the European Union (EU), last Thursday. It appears to have been a significant topic of debate in their respective boardrooms.
Sports Direct was one of the first retailers to issue a dedicated statement, following last week's EU referendum result which was 52%-48% in favour of the UK removing itself from the union, and it would seem the subject is set to play a central role in business discussions between the wider retail industry and its suppliers in the coming months.
Mike Ashley's sports equipment business warned the associated market volatility and lack of transparency about future political plans, in particular material changes to sterling/dollar exchange rates, could impact the company in the months ahead. Meanwhile, Dixons Carphone said on Wednesday that its leadership team have "been giving some thought to this", but it remains confident about growing the business in the "inevitable" period of volatility the UK has now entered. CEO Seb James also admitted on Radio 4's Today programme it is still too soon to understand what the ultimate impact on the economy will be.
Carpetright's Wilf Walsh, who was commenting in the floorings retailer's full-year results statement, said he was "cautious about the impact the associated uncertainty will have on consumer confidence".
The cautionary mood is clearly apparent across the industry, and when Essential Retail caught up with Rupal Karia, managing director of Fujitsu UK's retail and hospitality operations, he suggested that last week's referendum result has already had an impact on some of his customers.
"A customer of ours had their orders cancelled by a supplier," he explained.
"The customer still wants to buy the hardware but they can't order the items – it's unheard of. Usually it's the other way around and the customer doesn't want to buy anymore. It's so unusual."
Karia, whose job is to maintain and grow Fujitsu's retail and hospitality clients in the UK – a list that includes the likes of Marks & Spencer and McDonald's – says that the above supply issue has happened to one of his company's biggest customers.
He emphasised that Fujitsu has not cancelled any orders as a result of 'Brexit', but he acknowledged: "Unless you bought at a previous point, you probably can't honour things that are still in the factories because the price when you translate will be significantly different.
"We as a company signed lots of documents talking about our desire to remain in Europe, however the Fujitsu Group has made it clear they will support whatever route the UK takes. There will be no lack of investment as a result."
Various other retail industry figures have contributed to the debate on UK's imminent exit from the EU, with Jon Copestake, chief retail & consumer goods analyst at the Economist Intelligence Unit, suggesting the grocery market may experience a negative impact "as rising import prices and consumer belt-tightening squeeze margins in both sides".
The EU referendum result may also see an end to the polarisation in grocery spending that has emerged since the last recession, with Copestake predicting this trend will potentially become less prominent. He added that while Waitrose and M&S have seen food sales growth supported by high-end spending as incomes have recovered, people may now trade down rather than squeezing the mid-priced retailers.
Siobhan Gehin, partner at management consultancy firm Kurt Salmon, drew attention to the impact the vote will have on eCommerce exports, which she describes as "one of the great success stories of UK retailing in recent years". She suggested retailers may find tariffs or slower movement of goods within the EU countries and could consider locating distribution centres in areas which are part of the union.
On a more positive note for British business, Gehin noted that UK eCommerce exports will be cheaper with the weaker pound, "so retailers may well want to think about focusing on growing international eCommerce sales as a potential mitigation to the challenges they're facing".
Like these spokespeople and the many other representatives from the business community who have spoken in the aftermath of the UK voting public's decision to leave the EU, Karia said that the uncertainty and lack of political leadership on the matter is one of the main reasons why share markets will enter into a period of uncertainty. However, he says the truth is that no-one knows what any future 'Brexit' deal will look like, so accurate predictions of the referendum's ultimate impact on the economy can only be made when the country has reached that point.
The EU is yet to detail, in full, how it plans to work with the UK if the country officially invokes Article 50 of the Lisbon Treaty and starts the process of leaving the union. More information here will give retailers and the wider business world more clarity on the consequences of last week's public vote.
Karia commented: "If you think about where we were getting to with free movement and digitisation it was effectively becoming a free market. It drove massive competition into the UK market – it was a nicety resulting from the previous agreement we had with the EU.
"No-one said that's going to stop yet, so it could just carry on. No-one knows so there will be companies that decide not to invest because of the uncertainty. Until we get clarity there will be a bump for while because no-one is going to want to take any big decisions.
"The best thing for retailers would be getting an agreement to what that roadmap looks like as quickly as possible. Other sectors would like it to be a slow process but in retail they need [government] to get on with it as quickly as they can."
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