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September 2022

How can the UK channel handle currency fluctuations, potential price rises and inflation?

Sterling has fallen by as much as 12.5% against the dollar since February 2022. As most vendors still price in dollars, this either means price rises, or vendors having to sell more in sterling to repatriate the same amount of profit as they would have budgeted at the beginning of the year. Many vendors set yearly targets in dollars because that’s their home currency. So if the dollar was worth just over £0.73 in February, a product that sold for £1,000 with a 10% profit margin would be repatriated as $1,362 and a profit of $362. The same product would return $1,216 and a profit of $216 at the end of July. That’s a sizeable fall in turnover and profit. If a vendor planned to sell $40m of kit in the UK in 2022 with a profit of $4m, at July currency rates it would need to sell £32.9m of equipment instead of £29.36m at February rates. That’s a sales increase of nearly 11% just to stand still. If you apply that to most US-based vendors trading in the UK, how likely is it all of them will achieve that level of increase at a time when...

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