Home opinion-and-analysis ShawThing Dollar slides, prices up – not necessarily

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Logically as the dollar slides towards 90 cents from a high of more than $1.05 just a few weeks ago there will be increasing pressure on prices.

Gerry Harvey was his usual concerned, affable, self, warning that if the dollar slipped below 80 cents consumers should expect a 25% increase in retail prices. Nice try Mr Harvey but your warning is a little flawed – first we are not at 80 cents yet and second there is generally a couple of month’s stock buffer in volume consumer goods so it is not imperative that shoppers come in pre-June 30. Poor advice.

Consumer group Choice warned consumers should be sceptical of any companies that suddenly put prices up and blame it on the Aussie dollar. Good advice – shop around.

Shane Oliver, AMP Capital chief economist said that “It’s the same with on-line suppliers. Price when translated (I think he means conversion rate) will be higher than six weeks ago”. Technically correct advice.

Kogan could not resist a tilt at his old nemesis Gerry Harvey.

“It's ludicrous to have a bricks and mortar dinosaur out there in the media telling the public what online retailers are going to do with prices. Gerry should not be speaking on behalf of our industry when Harvey Norman is not a real part of it, and does not understand online retail” he said. 

“It's very interesting timing for Harvey to come out with these comments, veiled as a community service message. I think Harvey Norman is looking at some dismal numbers to end the 2013 financial year and this is an attempt at urging people to buy something at his stores before June 30” he added.

Some retailers use the excuse of a falling AUD to raise prices, but this shouldn't be the case, especially in the consumer electronics industry. The fact is that technology is always getting smarter, cheaper and more efficient. A few years ago a 46" LCD TV used to cost over $3000. Now we sell them for $439. Efficiency in manufacturing technology advances much faster than any currency movements. Even with the dollar plummeting nearly 10% in the last 2 months, the prices of Kogan TVs are cheaper than they've ever been” end of advertisement. 

 Opinion

The current dollar slide has more impact on future costs – goods that are in the process of being bulk ordered or yet to be ordered. Importers use a ‘hedging amount’ and as iTWire reported on 14 May they will now be looking at hedging at say 85 cents so stock will come in at that rate next time around.

What happens over the next few weeks is critical. If the dollar dips further then hedging may be even lower. If it recovers then hedging won’t be worse than 85 cents. In any case the worst case should be less than 20% rise before year end.

I have to agree with Kogan that the pricing of FMCG (fast moving consumer goods) is more about being competitive than the dollar rate.

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Ray Shaw

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Ray Shaw ray@im.com.au  has a passion for IT ever since building his first computer in 1980. He is a qualified journalist, hosted a consumer IT based radio program on ABC radio for 10 years, has developed world leading software for the events industry and is smart enough to no longer own a retail computer store!

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