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How does the weakening pound affect UK technology prices?

by Scott Bicheno on 27 October 2008, 19:06

Tags: SCAN

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EDI boys

So here are two reasons why many retailers and etailers may have already priced in the exchange rate change shift. The EDI boys, as characterised by Raja, are etailers that don't hold any inventory and are essentially a shop front for the stock held by the distributor or wholesaler they derive their offerings from.

When a customer buys from them, they're effectively purchasing from the distie with the EDI boy merely a facilitator. The product is usually shipped straight from the distie too. Because the EDI boy doesn't hold any stock they're immediately exposed to exchange rate adjustments made by their distie.

The other phenomenon is replacement cost pricing - in other words charging what it will cost to replace the product rather than what it cost to buy it in the first place. It's understandably tempting for retailers to raise the price of their products to currency adjusted levels, even if they bought them when the exchange rate was more favourable.

 

USD/GBP exchange rate, 1 month

 

USD/GBP exchange rate, 3 months

 

Both charts are coutesy of the BBC news website.