How Brexit Presents Big Opportunities for Small Brands

We woke up to a very different reality on the morning of June 24, 2016. The “Leave” Brexit referendum result produces an awkward position for at least the next two years while protracted exit negotiations occur. One thing is absolutely clear: uncertainty will overshadow this political and commercial divorce.

How Does Brexit Impact Small Businesses and Services?

A menu of imports and exports ranging from Italian parmesan to the Norwegian cod served up by the nation’s 10,500 fish and chips shops[1] will be affected. Small businesses and services should note that the “conscious uncoupling” from Europe that will have a bearing on brands worldwide is a process that will touch their brands as well…while offering opportunities, too!

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Image via Financial Times

Neither investors nor consumers embrace uncertainty. Nonetheless, this fact presents unique opportunities for small-to-medium business, services and products who position their brands to take advantage of the moment.

The timing couldn’t be better to give your brand health check to ensure you’re well positioned to take advantage of every opportunity in the new reality of Brexit!

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We’re sharing some potential and insights for small and medium sized brands, opportunities for Dublin and Ireland as Britain’s largest export market, the future of Brand Britain, as well as analysts’ speculation on the big brand short term winners and losers.

Speculation: Brexit Impact on Ireland

Imagine Dublin as a doorway to the continent and Ireland as the only English-speaking country in the EU. The Silicon Docks versus Silicon Roundabout debate was already receiving attention as Dublin’s tech scene growth kept apace with or exceeded London’s.

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Image via Visit Dublin

Soft news attributed to the likes of JP Morgan and Morgan Stanley leaked out of Canary Wharf as concerns were voiced regarding shifts of thousands of jobs. Over and over again, Dublin is seen on the short list of post-Brexit financial centres standing to gain.

Flexibility: Small Services Can Adapt

Think small. Faced with tomorrow’s uncertainties, big brands saddled with large labour pools and skyscraper HQs are unable to formulate strategy and take action with the flexibility that small businesses and services excel at.

Opportunities rest with those which position themselves as open, progressive, willing and able to help customers navigate these choppy waters, reports Toby Hoare, CEO of J. Walter Thompson Europe. “They’ll be the will ones which consumers want to associate with, and buy into,” he wrote in London-based City A.M. [2]

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Image via WSJ

For US-based startups, small businesses and services looking to borrow money for further investment, observers indicate that market volatility prompted by Brexit is likely to keep interest rates low, giving owners a great opportunity to grow their businesses at “generationally low costs,” according to Fast Company.[3]

Communication: Small Brands Can Benefit

While the media and big brands scramble to figure out the global ramifications of a post-Brexit world, small brands can benefit by offering ever more diligent assurances to customers that it’s business as usual. Now more than ever, the “Shop Small, Shop Local” mantra can punch above its weight by building customer-centric, emotive messages to connect and build trust.

In many ways, Brexit is also a once-in-a-lifetime opportunity.

Based on our deep experience with small-to-medium brands during the recession, Persona Design can help you build the right brand strategy covering Brexit in the short term, as well as a long term growth strategy covering the next 2-5 years. As the press stirs it up, your business can deal with customer uncertainty by recognizing and bridging the disconnect.

Silver Lining: The Future of Brand Britain

The governor of the Bank of England has said that Britain is suffering from “economic post-traumatic stress disorder.” As big banks speak in terms of government bond yields, passive funds, 10-year gilts and so on, small businesses need to communicate on a more personal level and brush off their welcome mats.

If you need a clear step-by-step process which gives you the structure and direction needed, to enable you to communicate at a more personal level, to build stronger emotive connections with your audience, then the Personality Profiler Performer™ is the perfect solution for you. This programme empowers you to make your brand more personable, different, distinctive and much liked by your primary customer.

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For British brands which cultivate their Britishness, Brexit may mean a stronger sense of national identity and desire to buy British, according to a survey done by J. Walter Thompson.

Respondents inside the U.K. indicated that Brand Britain stands for heritage, good quality and reliability.[4]

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Image via Visit Britain

“Welcome to GREAT Britain” followed “Cool Britannia” as the official British Tourist Authority slogan to lure visitors to the UK’s shores. The U.K. continues as the number one draw for Americans traveling abroad, with an almost magical appeal from Windsor Castle to Edinburgh Castle. And the way tourists see it, Brand Britain is now on sale.

Prediction: Brexit Winner Brands

Aldi and Lidl

Discount supermarket chains were already doing well against the “Big Four” (Sainsbury’s, Tesco, Asda, and Morrison’s), seeing a doubling of their market share in 2015, according to analysts Kantar Worldpanel as cited by the BBC.[5]

Supply chains connected to the EU will surely be affected by higher trade tariffs in due course. Aldi has created strong partnerships with British farmers, tightened a lean supply chain and implemented a 100% British fresh meat policy.

 

Premier Inn, Q hotels, and Radisson Blu Edwardian

Cornwall or Dublin, anyone? At the moment, Britain has a massive tourism deficit, that is, residents spend more abroad than the amount that is earned from incoming visitors. Due to weaker sterling, inbound visitors will benefit from by making the UK a cheaper destination in the short term. British holidaymakers may opt for more affordable stay-cations within the United Kingdom, or possibly look east to neighboring Ireland.

Hotel brands with the highest customer satisfaction levels[6] (Q hotels, 78 percent; Radisson Blu Edwardian, 77 percent; and Premier Inn, 76 percent) are poised to benefit from tourism shifts.

 

Johnnie Walker and Chivas Regal

Goods produced in Britain became cheaper in export markets because of the fall in the pound’s value. Companies like Diageo PLC, producers of Johnnie Walker, and Pernod Ricard SA, producers of Chivas Regal, generate 25 percent of their sales from these blockbuster Scotch whisky brands. They could see significant currency benefits from sterling’s decline, says Credit Suisse, especially considering that only 10 percent of sales are from within the U.K.

 

LVMH Moët Hennessy Louis Vuitton and Burberry

In the world of luxury fashion brands, a mixed bag of winner and loser brands is projected. The conglomerate LVMH is particularly well-positioned due to its popularity among US and Chinese shoppers. Figures reported indicate that only 22 percent of its 2015 sales were invoiced in euros, compared with 32 percent in dollar revenue.

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Image via Visit London

In February 2016, British fashion house Burberry announced a £50 million expansion plan for production in the north of England, a hedge against the 65 percent of Burberry’s costs currently priced in euros.

Who’s buying? On the must-do itineraries of the 214,000 Chinese visitors to the UK last year, the designer outlets of Bicester Village (where they spent on average £2,688 per person) ranked as the second most popular destination after Buckingham Palace.[7] Burberry is betting that the “Made in England” label continues to hold allure for Chinese consumers.

Prediction: Brexit Loser Brands

Jaguar Land Rover

Parent Tata Motors says losses for Britain’s #1 carmaker, based in the West Midlands, could mount up to £1 billion by the end of the decade[8] if there’s a 10 percent levy on vehicles produced in the U.K. and exported to Europe (which accounts for one-quarter of JLR sales) on top of a 4 percent levy on the import of components for the production of these vehicles.[9]

 

Sainsbury’s

Sainsbury’s is expected to be among the hardest hit British grocers, having just paid out £1.4 billion acquiring Argos, a business that’s reliant on spontaneous purchases and bigger ticket items than those found on the grocery shelves. According to Richard Clarke, a European retail analyst at AB Bernstein, this spells out vulnerability in the face of current consumer sentiment and the fact that Argos’s products come from suppliers in China and South Asia, typically paid in U.S. currency.[10]

 

Foxtons

With residential buyers sitting on their hands due to the recent rise in stamp duty thresholds, house prices in Prime Central London are expected to take a tumble now. Along with new-build construction firms Taylor Wimpey, Persimmon, and Barratt, Foxtons’ shares was among the biggest losers on the FTSE 100 post-Brexit landscape, down 22.59 per cent. [11]

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Image via Foxtons FB Page

JLL’s research unit says that the effects on residential property will be felt deepest in London, where Foxtons concentrates, but will also reach beyond. “We expect an immediate slowdown in housing market transactions, in the order of 10%-15%, resulting in downward pressure on prices for at least a couple of years.”[12]

 

Nissan, Honda, Toyota

The U.K. has been one of Europe’s most robust car markets in recent years in addition to being Europe’s third-largest center for car production. An automotive analyst at Euromonitor explains that 2016 will be a very tough year for car makers.[13] “Nissan and Honda are particularly exposed as their supply chains aren’t particularly international and more reliant on Britain than say BMW is.”

Nissan, Toyota and Hitachi have their production bases for Europe concentrated in Britain, so the issue of future tariffs is now a very real concern. Mitsubishi and Mazda are among the vulnerable brands when the automotive supply chain enters a state of disarray due to the UK/EU breakup.

GM’s Vauxhall Motors plant in Ellesmere Port near Manchester is considered most at risk because of the high imported content of the Astras made there. [14] Analysts say that Germany’s Volkswagen AG and France’s PSA Peugeot-Citroen would be hardest hit, as the U.K. represents represent one of their most profitable European markets.[15]

 

Marks & Spencer

The dramatic drop in consumer confidence reflects on the High Street darling. In early morning trading on the Monday following the referendum, shares in M&S – which have fallen 29% over the last three months — hit a 21-year low. Analysts point out that if British businesses must pay to import clothing, costs will inevitably be passed along to shoppers.

 

Barclays, Royal Bank of Scotland, HSBC, and Lloyds

The “Big Four” of British banks were hammered and can only be labeled as the biggest brand losers in Brexit’s immediate aftermath. European banks and Wall Street banks with a major London presence weren’t far behind.

 

Ryanair, easyJet, British Airways

Airlines that make most of their money in pounds and euros despite significant costs in dollars are hit by the double whammy of exchange rate woes and leisure traveler unease.

 

Three Top Brexit Takeaways for Small Brands:

  1. Immediate opportunities exist for small businesses and services to craft a brand strategy that will attract new and loyal customers while larger brands seek to find their equilibrium.
  1. This is the ideal moment for brands to take a deep breath, steer their own ships, and create a strategic roadmap. The question is, when did you last give your brand a health check to evaluate its weaknesses and opportunities for new innovation? Drifting at sea is not an option.
  1. The voice of smaller brands is amplified due to the circumstances of Brexit. They should ensure a well-developed strategy is firmly in place to speak directly and with authenticity to underpin consumer confidence.

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Questions to Consider in the Brexit Aftermath:

  • Have you determined which aspects of Brexit your brand may stand to gain from?
  • Is your brand well positioned to maximize opportunities presented by the EU referendum result?
  • How can you help your brand maintain a healthy position on a long-term basis?

[1] http://uk.reuters.com/article/us-britain-eu-fish-idUKKCN0ZQ0H0

[2] http://www.jwt.com/blog/jwt_news/after-brexit-what-now-for-britains-brands-and-brand-britain

[3] http://www.fastcompany.com/3061340/how-brexit-could-affect-small-businesses-and-startups-in-the-us

[4] http://www.jwt.com/blog/jwt_news/after-brexit-what-now-for-britains-brands-and-brand-britain

[5] http://www.bbc.com/news/business-34842198

[6] https://www.theguardian.com/travel/2013/oct/30/uk-chain-hotels-survey-best-and-worst

[7] http://www.independent.co.uk/news/business/analysis-and-features/british-shops-pray-the-streets-will-still-be-paved-with-yuan-a6857356.html

[8] http://autoweek.com/article/car-news/brexit-split-heard-round-industry

[9] http://www.telegraph.co.uk/business/2016/06/21/jaguar-land-rover-faces-1bn-profit-hit-from-brexit

[10] http://www.bloomberg.com/gadfly/articles/2016-07-01/sainsbury-may-get-buyer-s-remorse-from-argos-purchase

[11] http://www.independent.co.uk/news/business/news/foxtons-countrywide-shares-brexit-eu-what-will-happen-to-house-prices-a7105441.html

[12] http://www.wharf.co.uk/news/property/brexit-vote-hit-london-property-11529506

[13] http://blog.euromonitor.com/2016/06/q2-2016-forecast-update-2016-global-light-vehicle-sales-growth-to-be-lowest-since-2009.html

[14] http://www.autonews.com/article/20160702/OEM/307049963/10-questions-about-brexits-impact-on-the-auto-industry

[15] http://autoweek.com/article/car-news/brexit-split-heard-round-industry

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