September 2011 Newsletter

As another August English bank holiday weekend begins, bringing its customary mixed weather, it is a good opportunity to reflect over what can only be described as one of the most turbulent August months in recent history. In the past and still true today, many people take the opportunity to enjoy a vacation at this time with their families and relax. In continental Europe, many businesses close the entire month.  It seems that this year whilst many people went away, the city and the ratings agencies decided to sit back and play.

We have seen the most unbelievable gyrations in the world stock markets. Even though many bankers are absent, fortunes are being made and lost as the stock markets have entered a rollercoaster period. This turbulence has been made possible thanks to technology. In the past economic news, whether good or bad will take time to filter through the system, however in this day and age all one has to do is to press a button and the lives and fortunes of millions can be changed in a matter of minutes. It is not only economic markets that have felt the effects of this technology – look as the disgusting behaviour of the rioters in the UK. Without technology the hideous display of destruction and looting would not have been possible.

It was a pleasure last week when the internet failed for a day at the office. One had the chance to talk to people and get on with tasks without the constant interruption of the endless stream e-mails arriving in the feared inbox. This euphoria only lasted for one day, as one had to catch up and answer all the mails that had arrived on the following day. There can be no justification behind the markets rising and falling in the space of 24 hours by 5 to 10%. The long term fortunes of companies listed on the stock market do not change in this space in time. In the EU it is quite clear now that the leading policy makers believe that the hedge funds that are operating a policy of short selling are a major player in this policy of instability and have banned a number of their more dubious practices.

Globalisation means that the whole world is being affected by this volatility. Whether you are in America, China, India or Europe there is uncertainty. The rating agencies seem to have unbelievable power over the markets and lowering the rating ascribed to a country’s sovereign debt in Europe has a worldwide ramifications. Whilst, the country whose debt rating has been lowered has to pay more for its future borrowings, the value of its existing debt falls and today's world, one finds that the largest holders of sovereign debt come from the Asian world.

The reason I have raised  these issues in this report, is that we cannot see what has changed in the real world over the past six months. Fundamentally, it was always recognise that the gradual tightening in the credit markets would lead to consumers becoming more careful in the way in which they spent their money. This has been an ongoing process but unfortunately the movements and rumours and newspaper and TV comment are having a depressing effect upon the markets. Clearly, the poor weather that we have had in June, July and August has not helped matters either however it is very important that we do not become too downbeat about the future prospects. It is very clear that interest rates will continue to stay at the current record low levels for some time to come which can only serve to help consumers repay their debts and increase their feeling of well-being.

Over the past few years, we have written about the unstoppable growth in China and India. There can be no doubt that as growth slows up in Europe and the USA  these countries will be affected. Even though the domestic consumer market in China is only in its infancy, the Chinese already slowing up their expenditure. As a nation they are known as savers and do not wish to be weighed down with personal debt. We have spoken at length with our suppliers, who are asking us to predict how the consumer market will be affected by the latest economic data. We do not have a crystal ball but do not think that this is a double dip recession. It is another period of re-adjustment but at the same time it would appear that the financial markets are overreacting.

In order to succeed in business in the future, one will have no choice but to be controlling  very carefully the costs of one's business and that encompasses both the fixed costs and also ensuring that one is buying well. Factories in Asia are not in a position to decrease prices. They are suffering the same price inflation as we are in the Western world with increases in power and raw materials. At the same time they have to increase salaries at a rate of over 20% a year as decreed by the governments in order to meet human rights requirements. Their days as very low-cost producers are over. In percentage terms there are as many businesses failing in Asia as there are in Europe.

Anyone dealing in Asia at the current time has to be very wary as a number of the factories are in dire financial straits and unless one has great confidence in them through long-term relationships, you cannot assess their financial stability. In recent times the largest creditors of companies like Focus and T J Hughes can be found in Asia and South America - not in the UK. These companies took large financial risks in trading with these well-known names and are now suffering the consequences. In turn these suppliers utilise a vast network of small subcontractors who are all now going out of business. It is essential to have a presence in the overseas markets in order to assess the strength of the supplier base especially when one is being forced to pay out deposits for goods that will not be delivered for another three months. We are actually employing more staff overseas, in order to assess the viability of new suppliers.

August is traditionally one of the busiest months at our London showroom and this year has been no exception. It has been encouraging to see so many customers take the opportunity to visit us and we have been delighted with the comments that we have received following their visits. Over the past three months we have totally renewed the products on display in our 10,000 ft.² showroom and are extremely gratified with the results of this work. We are currently able to offer a very diverse range of products for both the indoor and outdoor markets.

We have enlarged and enhanced our indoor range and are now able to offer complete ranges of indoor dining, lounge and bedroom furniture. A number of these ranges used new style finishes and are made from a number of different raw materials that only serve to enhance the overall appearance. Additionally, a number of these have been developed to serve the mail order market where packaging is key to the overall success of the product.

In addition to the more obvious indoor and outdoor lines we have carried on developing product in more specialist areas. Our range of indoor heaters is selling extremely well and when these are combined with our cast iron stoves and green fuel products, we now have a comprehensive heating offer. Our green fuel product Ryc-eco has been submitted for an award, in recognition of its composition as a totally environmentally friendly product.  Unlike many other fuel logs, which utilise paraffin-based products in their construction, Ryc-eco comes from 100% recycled resources.

Our sourcing business has gone from strength to strength as many more organisations are approaching us to outsource their products requirements. Over the last two months we have been heavily involved in developing products that are incredibly diverse. Our offices overseas have managed to source items that vary from hair care products to pest control.

If you are interested in any of these products please do not hesitate to contact us and we would be delighted to assist you with your particular requirements. Our showroom is conveniently located near junction 4 of the M1 and we are open every day from 7:30 AM to 5:30 PM. Please call one of our sales executives who would be delighted to meet up with you.