HGA Group | Chairman’s Notes – December 2016
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Chairman’s Notes – December 2016

© Licensed to simonjacobs.com. 06/09/2013 London, UK. Chairman of fashion accessories label Zatchels, Greg Tufnell photographed at The Clubhouse, Gresham Street, London. Tufnell, who has a wealth of experience from his roles as managing director with Mothercare and senior roles at Burton and Next, will be working with directors Dean Clarke and Brian Brady on the company’s day-to-day business activities as well as its long-term strategic business development and planning. The leather accessories brand has recently opened two shops to support its e-commerce business, and has been growing its international presence in Asia, as well as in the US and Europe. Photo credit : Simon Jacobs

So 2016 comes to a close and what a year!!

Looming over the first half of the year was June 23rd and the Remain/Leave referendum along with its wildly different predictions from the so called experts.

Half Year 2 has seen margins that were already under pressure from the introduction of the living wage, the apprenticeship levy, the lack of reform to business rates and rising e-commerce costs come under even further stress from weak sterling. Black Friday has turned in to Black 10 days and Cyber Monday in to Cyber weeks on end.

That said :

  • Post Brexit, July to September the economy grew +0.5% the fastest in the G7 and we have seen strong retail figures in particular
  • Verdict have forecast Q4 retail growth at +1.5% with food, health and beauty set to over perform
  • the Deloittes consumer tracker is at its highest for 5 years
  • and digital sales are set to double in the next 3 years

It is not easy to read and in many respects these are all very macro outlooks or effectively averages in comparison to the local reality of the businesses we all run day in day out. They don’t make clear who will win and do well and who will lose and do badly?

So what might determine success in 2017?

As a retailer, Chairman and investor, I am looking in particular at the rapid success of the platforms such Amazon, Uber, Air BNB, Zip Car and Trivago and wondering why so much has been achieved by these businesses so quickly and why so many customers have engaged and bought in to their products and services at such speed despite them being so new?

My conclusions are as follows :

  • they are all aimed at informing consumers directly of the choices available to them and they do this quickly, concisely and within their budget
  • they succeed by giving customers a tool by which to compare and exercise their choice very simply and quickly
  • then the same tool also enables the customer to very quickly rate the performance of the service or product involved and inform others equally as quickly

If we look closely at the disruptive methodologies for doing business they are all on common themes :

  1. Consumer dissatisfaction with existing service levels such as dirty, smelly, late, uncomfortable taxis
  2. Inefficient value chains in the delivery of services or products with too many parties in the chain having control over pricing and access
  3. Providing a cost effective alternative that shares the margin savings with the consumers
  4. Providing a meaningful solution to an issue or need that consumers have but believe is not being addressed such as environmental and congestion issues
  5. Providing a choice of solutions for the consumer to choose from on one page without leaving home or their chair

Got right………all these scenarios have a positive impact on the customers P&L not just the retailers P&L.

So why am I always astonished and amazed by the reactions of the companies that are affected by them?

In the face of these new technology competitors or market entrants they opt to fight back with traditional market entry blocking campaigns or try to discredit the new competitor by raising doubt in the minds of the consumers. Then there is always the safe haven of the legal process that fails but does leave the lawyers looking forward to their Christmas partnership share out. However these responses appear to have just provoked more support for the providers of the new service platforms and one could argue the opposite to what the market incumbents were trying to achieve.

30 + years ago I went to a 600 strong conference where the strapline for the conference was that the “Customer is King.”

It was marketing puff then and no one was concerned with anything other than their own P&L let alone the customers. But in 2017, businesses large and small will have to truly make their customers king because it is the customers now that are truly the kingmakers.

A great example of a brand, a person and a product made king by the consumer is Sir James Dyson who commented recently “there was no money in manufacturing, assembly and distribution of products anymore [arguably the definition of retail!!]. The value lay in the IP and technology that created great products that consumers wanted.”

If it hasn’t always been the case then 2017 will most certainly be a year when as retailers and as business leaders, the question we have to ask is whether those are the products and services that we are creating?

As always I look forward to that challenge across all my businesses and hope that you do as well.

Thank you to everyone for their support during the last twelve months and our very best wishes for a Happy Christmas and a successful New Year.