As 2017 draws to a close, our practice heads reflect on the trends, challenges and highlights that have stood out this year.
Moira Benigson, Managing Partner
2017 has been a tumultuous year, and it is very hard not to be affected in business by what is happening on the political landscape and in the wider world. However, being a very positive person, I must also say that in my 30 years of running MBS, this year has been one of my most exciting and fulfilling years.
That is because of the work we have been doing for our clients this year – and because of a project I have launched called Boards of the Future.
“I must also say that in my 30 years of running MBS, this year has been one of my most exciting and fulfilling years”
Coming from South Africa, diversity and inclusion has always been at the top of my agenda. The work that we have started this year will continue into 2018 as we begin to help our clients address the changing landscape of what effective boards should look like.
This includes a challenge that I put out to chairs in the middle of the year to begin placing millennials onto boards so that businesses can better face the huge changes that we are seeing in the way young customers shop and do business. Working with some very forward-thinking and proactive chairs has enabled us to do groundbreaking work in this arena.
As part of this work, it has also been an absolute privilege to meet some of the smartest and most talented under-35s that I have ever met in my life. That has certainly been one of my great highlights from 2017.
Elliott Goldstein, Partner and Head of Retail, Leisure & Consumer
It would be all too easy to write a doom-and-gloom reflection on 2017. This year, in many ways, has been a perfect storm – the confluence of Brexit, FX, property rates, national living wage, apprenticeship levy – and many new and increasingly powerful entrants in our markets. Indeed, the coming year is sadly likely to see a number of once invincible businesses reach the end of their natural road.
Against this somewhat miserable back-drop, however, three rays of hope stand out to me.
Firstly, despite some of the toughest trading conditions in recent memory, we are starting to see a number of turnarounds succeed. No more so than in grocery, with Tesco, Morrisons and Co-Op Food each now moving out of ‘survival’ mode. I don’t think any of us can forget how grim the predictions were on each of these businesses – and how today, they are models of success to the global grocery community.
“Despite some of the toughest trading conditions in recent memory, we are starting to see a number of turnarounds succeed”
Secondly, most businesses within our sector now have the right leadership to address the challenges ahead. From appointing transformation directors to ensure that the cost-base of the business is optimised, through to chief data officers who understand the customer more deeply than ever before, many of the best UK businesses now have ‘dream teams’ at the helm.
On a related note, I am particularly pleased to note that 2017 may well have been a ‘tipping-point’ year in terms of women becoming CEOs in retail. Indeed, this year alone we saw Jo Whitfield become CEO of Co-op Food – the first female CEO in grocery – Emma Fox take the top job at Tofs and Paula Nickolds become John Lewis’s first female managing director. Hopefully, these appointments will add to the momentum behind moves to redress the gender imbalance across our industry.
Lastly, this year has proved that mergers can create value – and that taking the right bold, decisive risks can pay off. I am of course talking about the Sainsbury’s/Argos merger, which so many in our sector said wouldn’t work. Well, they have been proved wrong. This deal is clear proof that mergers can create tangible, transformative value in our sector – and may well act as a road-map for other decisive plays in the year ahead.
2018 will undoubtedly be a hugely challenging year. However, with the right people in place leading the core businesses in our sectors, there is reason for cautious optimism.
Maria Gabriela Henderson, Partner and Head of Private Equity and Fashion & Luxury
I reflect on 2017 as a year when we saw market disruption on an enormous scale and the rise of countless challenger brands that are rewriting the rules of marketing, brand positioning and customer engagement.
Nowhere is this more the case than in the beauty sector, where fast-growing challengers like Glossier, Pat McGrath Labs, Kylie Cosmetics and Charlotte Tilbury continued to expand at a rapid rate around the world. These brands have embraced digital marketing and content-led strategies in order to push their sales to stratospheric levels.
No wonder companies like The Hut Group and Unilever have been snapping up smaller beauty assets on a regular basis in 2017 as they look to gain access to their hugely engaged customer bases.
“I reflect on 2017 as a year when we saw market disruption on an enormous scale and the rise of countless challenger brands”
Meanwhile, as heritage brands have confronted the new consumer landscape in 2017, we have seen them grapple with their talent requirements and the challenge of bringing in the right skills for the future.
Fashion retail has seen a huge amount of restructuring, with many department store chains opting to move away from old, siloed management structures in favour of streamlined operations that prioritise cross-functional collaboration and the customer experience across all channels.
Deal activity in private equity this year confirms that businesses that are heavily exposed to very traditional channels, or that are only active in single countries, are unappealing to investors – especially since valuation expectations are not lowering. However, strong brands with an international presence, digital capabilities and premium positioning remain attractive.
Apax Partners’ acquisition of Matchesfashion for around £800m in September is a good example. In a challenging marketplace, the most innovative and well managed brands have shown that they can still thrive in 2017.
Stephen Rosenthal, Consultant and Head of Tech & Digital
The pace of technological evolution continues exponentially, and 2017 will, I’m sure, be remembered for several landmark moments that will change business as we know it forever.
First and foremost, data – usually in the background of technology – has been thrust to the front in 2017. With the news cycle telling us constantly about data being lost, sold illicitly or even used to influence elections, society has learned more about data this year than ever before.
Of course, these revelations hold potential risk, but it’s also worth remembering the opportunities ahead for those who embrace the opportunities that the intelligent use of data clearly provides.
All consumer-facing companies are rapidly ramping up their customer data management ahead of May 2018’s introduction of GDPR – the biggest shake up of European data regulation in two decades. We can anticipate enormous disruption, not to mention significant confusion, as companies work to comply. The end result should see companies acting more respectfully towards customer data, and in so doing, customers themselves.
“Data – usually in the background of technology – has been thrust to the front in 2017”
From the conversations we’re having with our clients on how to prepare for a more data-centric future, it’s clear to me that 2017 will go down as the year that the companies who wish to survive acknowledged the fact that, unless they place customer data – and therefore customers – at the centre of their business, they risk not having a business by this time next year. And that can only be a good thing for the ever-more demanding consumer.
Finally, this year has been significant for the growing maturity of the British entrepreneurial community. For the past five years, the UK has been regarded a startup hub. I’m increasingly convinced that we are now seeing the beginning of an exceptionally exciting scaleup hub. More and more UK companies in entrepreneurial pockets including London, Cambridge, Manchester and Edinburgh are now achieving true scale, becoming billion-pound “unicorns”.
With ever-rising talent pools, increased investment and all the benefits of the density of network these workforces are generating, there’s never been a more exciting time for British tech and digital.
Pearls of wisdom
We revisit some of the insights, analysis and advice shared by industry leaders in the MBS Weekend Edition this year.
“It’s worth remembering that the furniture industry hasn’t been disrupted for about 30 years. We believe that the customer wants interesting, unique products, sourced directly from individual designers” – MADE.COM CEO Philippe Chainieux. Read the article here
“Everything we have known about retail up until this point has fundamentally changed. Of course, digital advancement is at the core of this change, but that’s not to say that bricks-and-mortar doesn’t have a future or a significant part to play in future success” – Andrew Jennings, global retail advisor and former boss of Woolworths South Africa, House of Fraser and Harrods. Read the article here
“I never set the business up to have me as the face of it, or to be at the centre of it, but in today’s world people want to know about the founder and your motivations and inspirations. People are interested in the story behind the brand” – Nayna McIntosh, founder, Hope Fashion. Read the article here
“Digital is a place not just to sell clothes, but a medium to connect with customers” – William Kim, CEO of AllSaints. Read the article here
“You can be the smartest person in the room, but if you don’t have the ability to empathise and bring your team together, you’re nowhere” – Jambu Palaniappan, head of UberEats in EMEA. Read the article here
“Ideas are usually around solving existing problems: ‘I’m hungry – food delivery’ or ‘I need a boyfriend or girlfriend – dating app’. You see the same things again and again, whereas actually you should be asking people about the unique skills and expertise they have that very few other people have” – Alice Bentinck, co-founder, Entrepreneur First. Read the article here
“We derive value from our values – whether that’s value for customers, staff, stakeholders or shareholders” – Simon Susman, Chairman, Woolworths Holdings. Read the article here