(By Richard Holway)
As you’ve no doubt picked up, Sterling v Dollar has somewhat tanked in the last few days. It was £1=$1.62 last night. A year ago it was £1=$2.005. Whether this is ‘good’ or ‘bad’ is debateable but the words used in the media – like ‘slump’ – rather indicates that most think it is ‘bad’. At Ovum (where I was a director until the Datamonitor acquisition in Dec 06), we made around 75% of our revenues outside the UK in mostly $-denominated prices. However c75% of our cost base was in the UK. It was impossible to increase our $ pricelist as sterling strengthened and we just had to watch it hit the bottom line. So, if I was still on the Ovum board today, I’d no doubt have a smile on my face.
Another indicator is interest rates. All the pundits suggest another half point cut in November and maybe a base rate as low 3% in 2009. This is considered as ‘good’. Go tell that to the large contingent of older people (dare I say it, like me?) who live off the interest and dividends (now non-existent for bank stocks) on the savings accumulated during a lifetime of work. They face a near 50% fall in their ‘income’ in the next year.
Memory Stick Price Index
Returning to tech, I’ve long wanted to established a Memory Stick Price Index as a way of demonstrating the harsher end of tech price reductions. At the 2004 Regent Conference, all the delegates were given a 32mb memory stick (I still use it!). At the 2008 Regent Conference the gift was a 1gb memory stick. In 2005, I bought a 512mb memory stick and it cost me £69.99. Today, I have received an email alert from Amazon offering a Sandisk 8Gb memory stick for £9.77! One suspects this collapse in prices has a lot to do with Samsung abandoning SanDisk take over (FT 23rd Oct 08) “citing the US flash memory card maker’s declining value and wider industry downturn”.
Run-of-the-mill tech gear
The announcement this morning from John Browett of DSG (who I got to know quite well at Tesco when he launched the highly successful Tesco.com) gives another indicator of the slumping sales for run-of-the-mill tech gear. I quote from the FT report posted a few minutes ago – DSG suffers amid European downturn - “Trade continued to decline sharply at PC World and the computing division, with underlying sales down 11% for the 24 weeks to October 18. Across the electricals group, which includes Currys, underlying sales fell 7%, while in the Nordic region – once the bedrock of solid performance for DSG – sales were down 6 per cent on a comparable basis.”
Sexy tech gear
I say “run-of-the-mill” tech gear above because I am still of the belief that some tech gear will buck that trend. Apple is a good example (see my report - Doom, Gloom and a Mighty Brightspot – yesterday) Indeed a reader called me yesterday saying that Apple were monitoring sales more closely and more regularly than ever before for signs of a slowdown – something that so far they hadn’t detected. I think that Apple products (and some others, like a sexy new laptop) are in the “makes me feel good” category. What my wife calls ‘retail therapy’ when she cheers herself with a new dress.
Lobster Price Index
Finally, perhaps we should keep an eye on the Lobster Price Index. The article from AP this morning - Lobster prices tank as diners claw back on spending - caught my eye. Clearly the writer enjoyed his task as the article incorporates lobsterisms in every sentence eg “Lobster's price collapse boils down to supply glut, as Maine catches tail end of credit crisis.” This is, of course, the same ‘trade down’ effect that we are seeing here in the UK as Waitrose shoppers enter Lidl for the first time. It is worth pointing out that many of the luxury foods of today were the staple diets of the working classes not long ago. Oysters are a good example of this.
If I can now afford to indulge in a lobster dinner, then perhaps this credit crunch thing is not all bad!
Thursday, 23 October 2008
(By Richard Holway)
Posted by Richard Holway at 09:24