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UK Market Insight: Covid Bounce Over. Back to Normality?

F-Putin

No, you are not reading the same article from a month ago although the F-Putin sentiment remains. The war in Ukraine continues, Putin continues to do his worst and we all end up paying the price – most of us paying with an inconvenience and an increase in the cost of living which pales into insignificance when compared to loss of life, loss of loved ones and loss of homes and livelihoods. F-Putin.
By Gordon Way

The impact of all this hot on the tails of Covid (is it OK to talk about Covid in the past tense?) is really beginning to tell. Inflation is now rife and (dare I say it) appears to be out of control and consumers are really, seriously beginning to feel the pinch – new level energy bills are now hitting doormats reducing disposable income.

Yet at the same time, for the first time in history, job vacancies now outstrip the number of unemployed. Nice one Boris – wage inflation will now add to the pressures of business. Could this be the perfect storm? Inflation rising, interest rates rising and, at the same time, UK retail sales fell back unexpectedly in April – the first decline in sales for over a year.

There’s always winners and losers. Let’s face it BP and Shell are winners – but boardsports are more likely to be amongst the losers. Staycations are still in vogue and UK resort bookings are strong – but boardsports participation may well be suffering. Disposable income is on the decline.

Within boardsports there are also going to be winners and losers. One of the winners is Nick Warman, co-owner of online skate and skate-fashion specialists, Super Eight. Nick went into business with Sam Culshaw – both have a solid history in the boardsports business (skate/footwear) as Sales Agents and in 2015 set up online retailer Super Eight. Poacher turned Game Keepers – they know the business inside out.

Skate is their background, it’s in their blood and they are skate through and through. Their new facility (East of Nottingham) boasts a mini ramp. “We only employ skaters so from top to bottom we are a skate company. I’d also say we’re a digital-first company and that’s how many of our suppliers view us – we’re legit and at the same time we’re only online.”

So how are things? “Good. The Covid bounce is no longer and the huge overstock in the supply chain is not without its issues but we’re up 15-20% on our biggest year so we’re certainly not complaining.”

What’s good? “Footwear and clothing is very buoyant, hardware is difficult because of the distressed stock but we’re still doing OK and of course, that stock also presents us with opportunities. My biggest concern is the supply chain issue that I reckon will be with us for at least a year… and maybe a lot longer.” Other issues? “Honestly my biggest concern is the brand D2C’s. I completely understand why a brand needs to do that and I do not have an issue as such apart from when they start discounting. They can deliver a product to us with an RRP of £55 and 2 weeks later they are discounting it to £38 on their own site. Their D2C should be the leading light for a brand but they seem to miss that point. They’re becoming the worst discounters and they’re undermining their own brand.”

What else? “Yeah – UK stockholding.” As a Distributor this sounded good to me. “Brands that do not hold stock in the UK are going to lose out. Once we have received our pre-orders, which are now often late, we immediately move to the position where we do not consider in-season ordering because it just takes too long. Combine this with the dangers of late arrival and the potential erosion in margin … it’s an obvious decision.”

As for the future, Nick was really optimistic: “Apart from the cost of living squeeze, the supply chain, and the discounting – I am super optimistic. We’re doing well and we are going to continue to grow – because we are skaters through and through.”

Cannot disagree with him there!

Surf, and Paul from Zuma Jays in Bude summarised it beautifully: “Same shit different day,” he continued to explain. “I think we all forgot what the business was really like. Covid drove customers to our doors and to our tills. We could sell stuff all day long, all season long without thinking about it and we got used to it. Now we are back to the real normality. We’re watching the weather and trying to second guess whether the customers will come and, if they do, will the economic squeeze impact their purchase choices.”

So, the Covid bounce is over? “Yes – for sure. But we will still benefit and we will hold on to some of the new converts. We were all fooled by Covid and stupid to think that it would continue. That’s why I say same shit, different day. We’re back to where we were before – Feast and Famine according to the time of year and the weather.”

What are your concerns? “The supply chain is overloaded – we all know that and so that’s one to watch. Holiday Let owners have been greedy and they need to be careful – paying £5k or £6k per week for a house in Cornwall is not far off a Caribbean holiday. Let’s ensure we still keep a holiday in the West Country within reach. Don’t get me wrong – I have a strong feeling that at the end of the summer it will all be OK – but we all have to expect the current world and UK events to have an impact.”

Are the price hikes having an impact on consumer habits? “For sure but we don’t shy away from that conversation – we talk about the price rises. Consumers are very understanding and accepting. One thing we need to remember is that when I started her (1999) a good wetsuit was £140. Today it’s £150. That’s pretty good going.”

So, a quick look at snow and Jeremy from TSA was “cautiously optimistic – we know that turnover is going to go up because of the price rises – so that’s a given. I also think that unit sales will increase albeit modestly. I’ve bought for that. I am confident that there’s still a lot of people who have not managed to get to the snow and they are going to get back to it. There’s only so much time you can spend on Netflix.”

“One positive is that with all the crap going on the consumers are very accepting of price rises and really just shrug their shoulders and accept that things are going to cost more – for all the reasons they already know.”

In summary – it’s not great, it’s not bad, there are concerns and Putin is a F-Wit.  Did I say that before?