The Heart of the Economy
Tony Gregg, chief executive, Anthony Gregg Partnerships discusses the current state of play for retail and hospitality.
Leaders in the retail and hospitality sectors are facing an unprecedented set of challenges. The consumer industries, which also include leisure and travel, have become powerhouses of western economies in recent years, but they have also been among the hardest hit by the coronavirus pandemic. Retailers classed as non-essential have been forced to close their doors as have thousands of restaurants, pubs and other hospitality venues. Sadly, some businesses have already shut for good – 650,000 jobs had been lost in the UK hospitality sector alone by the end of 2020 – with more set to follow in the difficult months ahead.
For many retailers heavily invested in physical stores, the pandemic has strengthened headwinds that have been blowing for some time. Famous names like Debenhams and Topshop have struggled to compete with nimbler online rivals who have the benefit of a lower fixed cost base and distribution models built for a digital age. The demise of high street stalwarts was not caused by Covid-19 but the pandemic has provided the knockout punch.
Yet amid the undoubted challenges there will be opportunities too. Pre-pandemic, hospitality was an economic success story, generating £130 billion in turnover in the UK and employing over 3.2 million people. The fact those jobs are spread equally across the country makes the sector even more critical to the nation’s future prosperity.
Retail and hospitality have historically proved adept at weathering economic highs and lows with the most successful businesses showing flexibility and agility in responding to the changing way people want to shop and socialise. This increasingly means embracing new technologies that allow people to search, book and pay for products or services on digital devices. Mobile is the fastest growing retail channel, while contactless ordering and payment is quickly becoming the norm in pubs and restaurants – accelerated by social distancing requirements.
Home delivery, meanwhile, has enjoyed a surge in both sectors as businesses look to get their products and services to consumers in a safe, convenient way.
The agility that has been on display during the pandemic has always been a feature of the consumer industries and while leaders are understandably sanguine about the challenges posed by coronavirus, the expectation is that businesses will rebound as and when economies begin to reopen.
Things will have changed, however, and leaders will need to think strategically about how to position their business for future success. I speak with CEOs on a daily basis and all of them are embarking on transformation projects that consider both new market realities as well as the future of work and how it might change after Covid-19.
Bosses that have previously been of the mindset that staff should be in the office at all times are coming to the conclusion that for many of the workforce home working is here to stay, if not full-time then as a regular part of their weekly routine.
Some are already making plans to scale down head offices and use their remaining office space as hubs for meetings and project-specific tasks. This in turn opens up new opportunities to employ talented people who live further afield geographically.
This shift in working patterns has wider consequences for businesses who operate in busy urban centres. With fewer people travelling into cities for work, those places may not be able to sustain the same levels of retail and hospitality in future, requiring leaders to rethink their property portfolios and routes to market. Already, we are seeing high street food-to-go brands pivoting to develop new retail offerings and provide home delivery and subscription services.
On the flip side, businesses operating in suburban locations stand to benefit from a growing number of home workers who will still look for the escapism offered by physical retail and hospitality.
We don’t yet know the extent to which these trends will take root, but what we do know is that leaders will need to be both agile and brave in responding rapidly to a changing environment based on the best insight and analysis – as well as a healthy dose of gut instinct.
Tough decisions lie ahead about business strategy and the people needed to deliver that strategy. While there will inevitably be roles lost there will also be new ones created, especially in IT and logistics. People that boast desirable skills will be highly sought after and will have the opportunity to move between different consumer industries where skills are transferable.
A flooded jobs market will deepen the talent pool, but it will also make identifying the best talent and then securing and retaining that talent more difficult than ever. Businesses will need to invest in training and executive coaching in order to keep employees feeling motivated and valued. Equally, those people in high demand will find themselves under pressure to deliver results, and fast. Honeymoon periods are a thing of the past.
More fundamentally, CEOs in post before the pandemic struck will have to decide whether they are the right person to take the business forward. They will also be asking the same question of their senior leadership team. Invariably, one or two board members will not be right for the task ahead. Some may even volunteer that it’s time for them to move on and let someone with a more appropriate skillset or a greater appetite for major structural change take the reins.
Employee health and wellbeing will continue to rise up the corporate agenda accelerated by the shift to remote working. Businesses in general are becoming more willing to talk about the mental wellbeing of all employees – including those in senior roles.
We should also expect sustainability to become intrinsic to future business strategy as political leaders and heads of industry come to better appreciate the damage that can be caused when global health and environmental risk becomes reality.
Life will be tough for retail and hospitality leaders in the months and years ahead. But I believe the resilience and spirit of innovation that exists within the sector will see our businesses not only recover but re-establish their role at the beating heart of the economy.