This month I want to talk about inflation. I am aware that this is not a nice topic, it is a little bit like Covid and Brexit. Nothing good can come out of it... or can it?
I have a mentor, a fabulous retailer called Stuart Rose, who once told me to ‘be brave’ when it came to the annual price adjustment. If there was ever a moment to use the idiom ‘easier said than done’, then this is it. But, be brave we all must be.
I employ about a hundred people and anything with the word salary in it is likely to bring me out in a cold sweat. Add the word inflation to that and my heart rate will increase to Peloton levels. In isolation, dealing with salary inflation is depressing. First, I had to look at the statistics for what other companies were doing, where I have offices and staff to pay for. That is the UK, America and across Europe. Then, I had to forget all that and decide what I could get away with. It was horrible. The part of being the boss I do not like is the impact you have on people’s lives. I am much happier with my pens and a sketch pad.
Once you mix in rising energy costs, rents, material costs and the labour market, your head starts to spin. There are financial advisors and spreadsheets and endless meetings but at the end of it all, you must make a call.
Of course, this cannot be done in isolation. You also must charge more for your services and can work this out in a similar way to working out what you can get away with on salary. Sure, there are the margin and profits and all that, but when it comes to brands, there is also where you sit in the market and what you are worth. So finally, you sit there looking at a spreadsheet, while dreaming of sketchpads, and make a call.
I do not like to talk about this, but last December I had to close my Covent Garden store. It broke my heart. After five years, it had not made a profit. What was the point? Central London had yet to have its post-Covid bounce, and I did not see large profits looming in that store, so off it went. If only I had been braver. You see, apart from my eye test, which remains for some people an eye-watering £150, I put up all my prices by 20%. Guess what happened since this price rise two-and-a-half months ago? Sales in my retail group of stores increased by 33%. That includes closing one store so the real growth per store is significantly more.
Then, there is my bespoke service. Back in January, I told you I had reintroduced my full suite of bespoke services again for the first time since I closed my factory in China. What I did not mention was that I had increased the prices by 25% to reflect the switch to manufacturing in London. Guess what? Sales have grown in bespoke by 40%. I am not sitting here feeling smug. I am sitting here thinking: ‘Why didn’t I do this years ago? Why was I not braver?’
I talked to some of my trusted opticians about how they put up their prices. Some rely on suppliers putting up their prices and maintaining their margin, others look at how much they think they can get away with multiples on product ranging from two times trade price to six times trade price. I know, for example, that some accounts in America sell my Catch London product for five times trade value. Good for them.
This morning, I heard on the radio that the UK was not going into recession after all. We grew 0.5% as a country. The reason given was ‘the return of the Premier League after the World Cup’. Really? The Premier League is responsible for that? Maybe, we are all earning a bit more and spending a bit more because despite what we are fed by the media, things are still pretty great, especially compared to the unfortunate people in Ukraine.
So, when you are looking at what you are charging for your services, if I can be so bold as to paraphrase a retail genius, be brave and charge more.