The minimum wage is the lowest payment a business can legally pay a worker per hour; it was significantly increased in October of 2014 to £6.50 for those ages 21 and over (it was £6.31 in 2013). Rates for other ages have also increased however they’re less significant to us at Boohoo.
The increase means that Boohoo will have to pay out more money for their staff wages, which in turn could have a negative impact on our profits. Firstly we could just accept the increase in wage cost and accept that this will have an impact on our profits however we think that we can work on our business model to keep our profits growing.
We could aim to make our distribution channels and systems more efficient so that less people are needed during these processes, which would mean that our wage costs would in turn be lower. More machinery in the packing process could be an example of this.
Another way of making sure the minimum wage increase doesn’t affect our profits would be to increase the cost of our goods – however we really do not want to have to do this. As fast, affordable fashion is one of our USPs and could actually cause our sales to suffer.
We could aim to find a away to source less expensive materials or production costs, this could balance out the increase in wage costs. Perhaps we could outsource more of our production into countries other than the UK to avoid the British minimum wage however we would have to pay more for transport costs.
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