A discussion that emerged from last week’s post about NCP reminded me of a topic which comes up a lot when discussing the fate of distressed retail and hospitality businesses.

Surely, the argument goes, the business would have been in a better state if it had never sold off the freeholds of the properties it operates from.

It’s an interesting point and also often a controversial one, with big programmes of “sale and leaseback” where a business sells the properties it operates from and becomes a tenant often cited as examples of cash-extraction that weakens a business.

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In reality, however, the property ownership picture for retail and hospitality businesses in the UK is very mixed:

• the large grocers tend to own quite a lot of the property they operate from, though the precise figure has varied up and down as they have bought and sold freeholds.

• The same is true for pub, hotel and restaurant chains

• But specialist retailers, in particular those operating from retail parks and shopping centres, tend to be leaseholders (not least because in many of those sites the freehold would not be for sale)

• And for small independent retailers and restaurants the picture will be similarly mixed, with many high street freeholds owned by institutional or private investors but some definitely owned by the person or family operating the retail business inside.

So is there a ‘right’ answer? What are the pros and cons of owning the building(s) you operate from? Here are some thoughts:

The case for freehold

Whether you are a single site specialist retailer, a restaurant or a big chain, owning the properties you operate from can offer some real advantages:

• Protection in a downturn - self-evidently, owning your property means not paying rent, and that can give a business a real cushion during a recession. Many of the large pub chains, for example, largely survived Covid shutdowns on the basis that they didn’t have a rent bill to pay and so could ‘freeze’ their businesses more easily. Contrast that with cinema chains who tend to operate on long leases, and have had to spend the years since Covid renegotiating those leases to avoid disaster.

• A strong balance sheet - having the big asset of your property on your balance sheet gives you something you can borrow against relatively cheaply when you need to invest in your business or want to expand. That’s a model that has worked well for some businesses as they have looked to build a national chain - borrowing against the current freehold assets to buy new ones.

• Flexibility within your property - owning the freehold of a business also means having complete control over what happens in it. Want to refit? Decide to turn the upstairs from storage space into more seating? You’ll still, of course, have to negotiate with the planning authorities but at least the overbearing landlord is you!

The case for renting

So what about the opposite model, where you never invest in property but just rent spaces from others? That has its advantages too:

• Freeing up capital - if you own the freehold to your business then by definition you have quite a lot of capital tied up in the ‘property’ part of your business rather than the ‘retail’ part of it. The yield on commercial property (the return you’d earn if you just operated the property and rented it to someone else) is probably only about 5-7%. If your retail or hospitality business model is more profitable than that, then the logical thing to do is to withdraw capital from your property and invest it in your trading business. As stated above, you can do that by mortgaging the property but that comes with risks and fees - much better to sell the freehold and release that capital for a more profit-generating purpose.

• A clearer view of business performance - arguably the biggest problem that occurs when businesses (especially big chains) own their own freeholds is that it gets much harder to really see how the trading part of the business is performing. Take the example of a retail chain that owns its freeholds and is currently making a £50m profit overall. If a clinical look at the property portfolio reveals that it could have made £60m just by renting those properties out to someone else, then what you’ve discovered is that more than 100% of the profit in the business really comes from the property - the retail trading business is actually costing you money to operate. In reality, it can be very difficult to separate out the ‘trading’ and ‘property’ returns, which means there is a danger that management does not spot when the retail business is going off the boil because the results are hidden in a more complex picture.

So what should you do?

With pros and cons on both sides, what might the answer be for your business? Should you keep any freeholds you have, buy more or streamline and become a purely leasehold business?

Here are some factors to think about:

• The more exciting and fast growing your business, the worse the argument for owning the freehold. Why dilute your returns by investing capital into the steady but unexciting business of property when you could invest the same money expanding your core business faster?

• The more cyclical your business, the better the case for owning the freehold. If downturns are likely to be lengthy, then the protection of not paying rent becomes more attractive.

• The more clarity you want over your business results, the worse the case for a freehold. Arguably many UK retail chains (M&S is a good example) gradually began to underperform in the 80s and 90s but failed to notice because their accounts were buoyed by healthy returns from property - an oversight which took decades to repair.

• The smaller your business, the better the case for owning the freehold. There are several retail sectors in the UK (furniture is a good example) where the very high market share taken by independents remains a mystery - how are they surviving in such a tough economy? The answer is often because they are small businesses who own the freeholds of their sites. They can weather a bad market and aren’t obsessed with releasing capital for expansion. As long as they earn enough to pay themselves, they can last indefinitely.

• If you want to trade in certain places (most notably shopping centres and retail parks) then the answer will be out of your control - freeholds will not be available and renting will just be the cost of doing business there. For some sectors, then, where customer behaviour mandates being on retail parks, property ownership is not an option.

The answer, then, will depend on the type of business you operate, and on how you want to see your capital deployed. Owning no freehold increases the cyclical risk in a business, but owning too much risks limiting its ability to expand and grow.

That conclusion, by the way, also answers the question we began with. “Did that sale and leaseback programme structurally weaken the business”? The answer depends on whether enough capital was left in the business to enable it to expand and evolve as a leasehold operation. If you use the sale of freeholds simply to extract cash from a business and don’t leave it set up to grow (and yes, there are plenty of examples where that has happened) then don’t be surprised at the result.

At the same time, if you leave the freeholds in a business, you might be blinding yourself to what is really going on with the trading operation.

As ever, there is no one-size-fits-all.

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Business failures often prompt a lot of ‘where did it all go wrong’ head-scratching, and none more so than the administration this week of NCP, the largest UK operator of car parks.

On the face of it, how does a business that charges (a lot) per hour for car parking and operates sites with relatively few staff manage to end up insolvent? No surprise that commentary about the news has swung from blaming Covid, working from home, dubious financial engineering, the Government, the war in Ukraine, the war in Iran and a host of other prospective drivers of failure.

But what really happened, and what lessons can we draw from the story? Having had a little dig through the numbers, I think there are three factors behind the NCP failure, each of which offer food for thought to any of us in consumer businesses.

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Fixed costs

The first driver (if you’ll pardon the pun) of NCP’s failure is a familiar one to anyone operating a retail or hospitality business - the concept of Operational Gearing.

In a nutshell, this is a measure of how ‘fixed’ your costs are. The higher the proportion of your costs which you will incur anyway regardless of how much business you do, the higher your Operational Gearing.

That can be a really positive thing when times are good. As a car park operator, most of your cost will be the rent, rates and utilities on the property you operate. Once you’ve taken enough parking fees to cover those costs each incremental fee will be almost pure profit. In boom times, a business with high operational gearing can see its profits rise very fast indeed.

The problem, of course, is the downside when business is tough - if you don’t have enough business to cover your costs, you will spiral into losses very quickly. In other businesses where costs are more variable the challenge of a downturn is offset by the fact that costs go down when revenues drop. The car park, on the other hand, can’t reduce its cost base so easily - if the number of parking sessions goes down then it quickly becomes unprofitable.

And that brings us to Covid - a huge downturn for any business but a massive headache for anyone with high fixed costs. For NCP, this is clear from its accounts. In 2019 it had revenue of £226m but made a gross profit (before admin and other costs) of just £11.4m, or about 5.1%. That’s not the bottom line, that’s just the revenue less the cost of sales, which in this case will mostly be the cost of leasing and running the sites.

Wind forward to 2021 in the teeth of Covid and revenue has dropped to only £118m as everyone stays at home. The cost of sales has also dropped, to be fair, but not by nearly as much as revenue - so that £11m gross profit has turned into a (£35m) loss.

Now fixed costs are not necessarily fixed for ever. Over the following couple of years the business did a good job of trying to re-engineer its costs (mostly renegotiating leases) to better match this new normal - by 2023 it had £186m of revenue - not back to normal but getting there, and made a £31m gross profit.

It is fair to say, then, that operational gearing was a real headache for this business given the downturn generated by Covid, but it wasn’t fatal by itself as the business worked hard to match its costs and revenues. At gross margin level, the business was just about back to being a sustainable one at the point where it went under.

So if this isn’t enough by itself, what really went wrong? For the next layer in our story, we need to look a bit further down the P&L.

The cost of doing business

A P&L shows revenue, then deducts the direct cost of sales to get to Gross Margin - but we still have a long way to go before we get to the bottom line profit number.

Look further down the P&L and you’ll find some version of “Selling, general and administrative costs” - in other words, the cost of actually running the business. In the case of our car parking business, if the cost of leasing the property is accounted for in the Gross Margin, then the cost lines below that are basically the costs of the Head Office, the marketing budget and other ‘central’ costs.

The issue here is that these central costs also contribute to that Operational Gearing - if they are treated as fixed and don’t shrink along with the revenue.

It is easy to see that when looking at the P&Ls of retail businesses. When a business starts with 2 or 3 stores it is usually managed from the founder’s house or an office in the back of one of the stores. By the time, though, it has expanded to 300 stores across the country it will have a big head office and teams of specialists doing everything from brand marketing to filing the accounts. But it will also be big enough that it is generating enough margin to pay for that head office.

There is, though, an ‘uncomfortable middle’ (which for many retailers sits between 50 and 100 stores) where the business is big enough to NEED the head office but isn’t big enough to be able to PAY for it. A common growing pain I see a lot is when small successful brands start to expand and hit this awkward size - if they don’t have the investment funding to push through to scale they can get into trouble.

What happens to NCP when you look at the accounts is that they arrive back in this ‘uncomfortable middle’ size by accident. Covid shrinks the revenue in the business and so the total cash margin being generated is lower than it was. The underlying administrative costs, however, don’t go down - if anything, they seem to increase over time. Specifically, the headcount labelled in the accounts as ‘managerial and clerical’ actually rises over time and is 50% bigger by 2023 than it was in 2019.

It isn’t clear what the driver for that increase is, but it is a critical problem for the business because it means that even with all the successful renegotiation of property leases, the business is spending too much of its margin on central costs and not generating the cash it needs.

Even then, though, the business was still generating a small positive operating profit by 2023 - not as much as it should have been, but not a loss. So why the collapse into administration? To find out, our final step is from the P&L to the Balance Sheet.

Debt burden

NCP is owned by a Japanese parent company Park24. Like many conglomerate businesses, Park24 had a complicated financial structure connecting its subsidiaries. NCP both was a lender to the rest of the group and also borrowed from it as cash flowed around the business. Critically, however, for most of its life the debt it owed to its parent was interest free. In 2022 that changed, however, and the debt became interest bearing. As base rates climbed from 2022 into 2023 (thanks Liz) the interest payments on that debt became much bigger - meaning that even though the business generated a positive operating profit all of that and more was swallowed by the interest bill and the business made a bottom line loss.

Nefarious financial engineering, then? Not really. The parent group in Japan is itself struggling financially and the change in the nature of the debt was probably just an inevitable consequence of the broader financial restructuring going on in the overall group.

To make matters worse, a change in Japan’s accounting standards which is due in 2027 would have forced the parent company to recognise all of the NCP future lease liabilities on its group balance sheet, complicating the rescue efforts even more.

NCP in a nutshell

It seems clear, then, that the real story is that the Japanese parent company bought NCP expecting to run a stable business generating cash returns from an established portfolio of sites. Instead, Covid happened and the business became an increasing problem. Park24 had to write off its investment in NCP entirely and clearly eventually made the decision to cease funding it and allow to fail as the lesser of two evils.

Interestingly, when you play with the numbers it looks like any two of the three things that hit NCP (Operating Gearing on leases, bloating admin costs and high interest rates on its debt) would have been survivable, but the combination of all three together just made the business unviable.

That is unlikely to be the end for NCP, however, as there is clearly still a good return to be made from operating some of these sites - one can only hope for the staff and suppliers of the business that a new NCP emerges from the financial ashes of the old one.

So what?

I suggested at the beginning of this piece that there were lessons for all of us from the NCP story. So what should we take out from all of this? Here are a few thoughts:

• Beware of operational gearing - do you have a clear view of which of your costs are fixed and which truly variable? As we enter a more and more unstable world this is an important analysis.

• Challenge every ‘fixed’ cost - once you have a view of the apparently fixed costs in your business, try to figure out how you can vary them anyway. As NCP showed, leases can be renegotiated, for example. No-one gets out of bed in the morning looking to have difficult conversations about varying contracts or walking away from liabilities, but when the alternative is your business failing it is worth picking up the phone.

• Be aware of your central costs - don’t get into the ‘uncomfortable middle’ if you can avoid it - make sure your central costs are appropriate to the size of your business. This is, of course, an area where emerging technologies can make a huge difference so make sure you are exploring and taking advantage of all of them. The alternative is simply that your competitors will do it to you.

• Keep a close eye on debt. We have decisively moved now from a long period of very low interest rates into a period of higher, and less stable ones. Debt is not, in itself, a bad thing as it allows you to expand your business and invest for the future. A keen eye, though, on the right level of debt for your business is essential, however, as is a backup plan for when times are tough. As many businesses know from bitter experience, the same downturn that reduces your ability to pay the interest on your loans is also likely to be the one that prompts your bank to want to stop lending to you, and it is the combination of those two factors which has finished off many businesses.

Running a car park, you’d think, should be simple and in many ways it is. NCP, however, offers a range of lessons for all of us in business. As I wish the teams across the business well for what comes next, I also suggest to everyone reading this that they learn those lessons. Caveat parker.

In the last Moving Tribes post about the challenges of managing change in an organisation, I made reference to the fact that ill-informed management teams in the early days of online retailing were prone to making big but ultimately incorrect investment decisions about digital technology projects that they didn’t really understand.

So its confession time - that’s a club of which I am a member.

I’m not alone, though. When, years later, I told the story at a business dinner about what I’d learned from signing off a multi-million pound investment in a ‘web platform change’ that took far too long and ended up delivering technology that was out of date before it even arrived, I was amazed by the number of people sheepishly raising their hands and confessing to having made the same error.

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The root cause of that apparently common mistake was a toxic blend of circumstances. Internet retailing was, at that point, fast growing and obviously very important for the future of any retail business, but it was also new and therefore not particularly well understood by boards or management teams. Even the technology leads in many retail businesses were experts in enterprise systems, tills and other ‘normal’ retail technologies but didn’t necessarily know that much about the web.

The result - when Boards gathered to decide on a digital strategy, the only actual experts in the room were usually the vendors or consultants proposing the project, and that is never a great recipe for a good outcome.

Looking back, this period of ill-advised web investment had clear phases:

1. “This new technology is not proper retailing, will never catch on and has no place in my business”

2. “OK, there are clearly a lot of start-ups doing quite well by focussing on that new technology but it is still basically cheating and will never replace my hard-won personal expertise”

3. “Oh god, we are getting left behind, let’s get a big consulting firm to come up with a plan”

4. “Let’s try to earn some bragging rights by writing the biggest cheque we can for a huge transformation project to catapult us from laggards to leader”

5. “Oops”

And finally, after riding that bronco, the world eventually settles down into a series of sensible, better understood and smaller investments which are a lot more likely to actually work.

And now, I suspect, we are about to ride the same rodeo with AI technology. I’ve heard plenty of established retailers explain how it doesn’t really apply to them (phase 1) and seen plenty of over-excited start-ups announce how they will change the world (2).

My worry now is that we are entering the ‘big cheque’ territory of phases 3 and 4. Imagine my horror, then, at the headline “John Lewis bets on AI-powered shopping and TikTok Shop in £800m investment”.

Luckily, this is not quite as bad as it seems when you read the detail, as these AI investments are a part of a much bigger investment programme which I suspect lumps in store refits, wage rises and a good deal else to get the eye-catching headline number.

Nonetheless, there is a danger that we are about to enter the phase where, just like the heady days which you could make your share price go up just by adding “.com” to your name, businesses try to generate investor excitement by being seen to ‘one-up’ each other with their AI announcements.

Perhaps a better alternative for your business might be to learn from the pattern of the past so as not to have to repeat it. A series of small experiments in how AI technologies can work for you, using the ‘test and learn’ philosophy we discussed in the last Moving Tribes, is much more likely to yield results than a single big bang project.

Get good at learning from these kinds of experiments, and then pushing resources quickly behind the ones that seem to deliver results, and you maximise your chances of making the best use of this powerful new tech and avoiding the pitfalls of the hail-Mary approach.

I’ve often likened these periods of rapid change to navigating through a thick fog. You might have a decent map and think you know the direction you should be heading, but however confident you are, it is unwise to simply run off in that direction at full speed. Without being able to see clearly ahead, there is always the danger of running off a cliff or falling down a hole.

Instead, the best approach when the future is uncertain is a careful one, learning from each new landmark that emerges from the fog. That might not get you a round of applause in a conference speech, but I’m fairly sure another “£10m on the wrong project” club is going to emerge from this AI revolution, and you don’t want to join it.

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Consider two businesses struggling with change programmes.

Business A has a great idea. The leadership team have discussed it at length, and may even (heaven forbid) have used external advisors to validate it. There is a business case, a project plan and a team allocated to making it happen.

And yet, it all feels a bit like pushing water up hill. Progress is slow, the ‘core’ business regards the project as a mild inconvenience and unless senior leadership continue to give the project real focus and demand regular updates, progress quickly stalls.

Business B, on the other hand, as a pretty mediocre idea. It felt like a good one at the time. It was a topic on which there had been lots of flashy presentations at industry conferences and one of the NEDs had forwarded around an article from the Harvard Business Review about what a game-changer it was.

The problem is that it has turned out not to be quite what Business B needed. The project is progressing well enough but customer feedback is mixed and it is increasingly obvious that the financial returns from the investment are going to be underwhelming.

The odd thing, though, is that no-one seems to be willing to step up and kill the under-performing project - it just rolls on from month to month, with it’s own update page in the management reporting pack making ever more feeble excuses about lack of delivery.

If you’ve worked in any substantial business for any period of time, you’ll have experienced both Business A’s problem (can’t get a project to start) and Business B’s problem (can’t get a project to stop), often at the same time.

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And oddly enough, these two apparently opposing symptoms point to the same underlying business issue. Businesses, especially bigger and longer established ones, struggle with change.

That is a big issue, because in a fast-moving world, the ability to deploy capital and people to reinvent a part of your business is critical to sustaining and growing the overall enterprise. Whether it is figuring out how AI is relevant to you, responding to an evolving customer need, launching a new product or restructuring to save costs, getting change right is not optional.

So why do we so often end up struggling - with new change programmes failing to start and lumbering legacy projects proving impossible to kill?

Here are some things to watch out for in your business:

The fear of not knowing

When faced with a new technology or a radical shift in how customers behave, one of the hardest things to do in a business is to raise your hand and admit that you don’t know much about this new thing. No-one wants to be the first to admit ignorance, and the natural human consequence of that is a lot of ill-informed discussion and decision making.

I’m old enough to remember when exactly this happened with digital technology - management teams who had no idea what a website even was signing off millions of pounds for web development projects they didn’t begin to understand, with predictable results. I’m also young enough to see exactly the same thing happening now with investments in AI.

The solution? The brave leadership team is one where it is OK to acknowledge that the new is scary and unfamiliar. Go on a course together and learn about AI before deciding what investments you might make - it will be more effective and valuable team-building than a day baring your souls to a flipchart in a hotel conference room.

The yes that is really no

What hides behind that project that is progressing much more slowly than you’d like is often a set of colleagues who don’t really buy into the idea in the first place. People will nod in the meeting, of course, because they don’t want to look unhelpful (or get sidelined) but in reality they aren’t convinced that this new technology will actually help them. As a result, their support is lip-service at best and they will miss no opportunity to go back to doing what they have always done.

A handy indicator that you suffer from this problem is the phrase ‘the Core business’. I’ve seen many examples of businesses where people will ask whether the meeting you are organising is on “the Project” or “the Core business”. That language is incredibly telling, implying as it does that the project is, by definition, non-core and therefore optional.

The solution is, of course, to invest time in changing that positioning. Making sure that everyone in the business recognises that change IS the core business and that this new project is important to the long term survival of their workplace will often unlock the unconscious support that can make the difference between a project building up a momentum of its own or getting stuck in treacle.

Sunk costs and careers

So why do some projects which are obviously not working refuse to die? The reason, in my experience, is the Sunk Cost Fallacy. If we stop this project we are wasting all the money we’ve spent on it and that is embarrassing. Even worse, we’ll have to report to the shareholders that we got something wrong, and they will not be happy. Let’s plough on and maybe it will all work out.

There is a deeply personal aspect to the Sunk Cost Fallacy too. Someone, or some people, championed this project in the first place. If we confess now that it is not working then at best those people are embarrassed and at worst they lose their jobs. They will probably, and naturally, try to avoid that, and if they are senior in the organisation then it will be easy for them to do so, since no-one more junior than them will want to point out the lack of the Emperor’s clothes.

The answer - cultivate being a business where testing an idea, realising it doesn’t work and moving on is a behaviour that is championed, not reviled. I’ve seen businesses reposition ‘strategic projects’ to ‘test and learn’ and unlock a huge wave of innovation and risk-taking that wasn’t there before, just by taking away the fear of failure.

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Getting change to work

In summary, then, what businesses A and B really illustrate is that they are not businesses which are change-ready. They show all the symptoms that so many businesses do, of struggling with the new.

Avoid their fate by becoming a leadership team which champions learning and exploring new things, where ‘I don’t know’ is an acceptable thing to say and where you spend time and energy convincing colleagues all across your business that change is mission critical. Champion a test-and-learn approach to reduce the fear of risk and reap the strategic dividends whilst your competitors struggle with change projects stuck in the mud.

Thanks for all of your feedback on my last post a couple of weeks ago, which talked about the current difficult employment market and the importance for businesses of using this moment to ‘lean into’ being a great employer rather than being tempted to take advantage of a flood of applicants.

Whilst that post summarises the way we as business leaders should respond to a difficult jobs market, what about the response we should look for from the Government?

That’s become a talking point this week as the most recent unemployment figures have shown a dismal end to 2025. In particular, this graph from that BBC article showcases just how much of an issue unemployment is for the young, in particular:

More than 16% of young people unemployed should give us all pause for thought - it is a huge waste of potential, damaging to the individuals involved and a massive drag on the drive for growth which is supposed to be central to getting us out of this economic malaise.

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So what has caused this situation and how do we fix it? There has been a good deal of discussion this week about the impact of health conditions, the damage to educational outcomes from Covid and other social factors. I have no doubt all of those are important and they are worth looking hard at for policy solutions. They are all international phenomena, however, and the employment situation for the young seems to be worse in the UK than in many other places. I can’t help thinking, then, that there may be some more basic things going on here at home.

Consider this table, for example, of the minimum wage rates that apply to different ages of worker in the UK and how they have changed over the last few years:

There are two things which we should take from this data which will be impacting employment figures.

The first is that the ‘full’ minimum wage for those aged 25 and above is 62% higher now than it was in 2018. That is just about twice the increase that inflation alone would have created.

The second is that the minimum wage which applies to (for example) 20 year olds has increased faster than the full wage. A 20 year old would have earned 75% of the ‘full’ minimum wage in 2018 but can now expect to earn 85% of that benchmark.

There are very good policy reasons for both of those things to have happened, of course. No-one, least of all highly paid executives, should be in any doubt about the social, moral and political case for increasing the wages of those who earn the least by more than average and closing the gap between the lowest earners and the median.

There is, however, an inevitability to the economic implications - by making it more expensive to employ people you weaken the case for people-intensive businesses to expand, and by closing the gap between the relatively untested younger worker and the more experienced older one you inevitably dis-incentivise employers from taking a risk on the young.

In more recent years, this increase in the cost of employing a younger person has been (perhaps inadvertently) made worse by the changes to Employers National Insurance. Increasing the rate was bad enough, but the big reduction in the threshold above which payments are due has pulled a lot of part-time workers into the scheme. This report from the Resolution Foundation, for example, estimated that with the changes in April 2025 the increase in the cost of the minimum wage of 6.7% actually translated into a 14.2% increase the overall cost of employing a part time minimum wage earner once the NI changes were also taken into account. In other words, the NI changes made a bigger difference to the cost of employing more junior (and often younger) workers than the actual wage changes in that year, without making any difference to their take home pay.

And then, coming this year, alongside the already planned changes in minimum wage, we have the Employment Rights Act. Just like those changes to wages, many of the changes the ERA will bring in are perfectly justifiable on social and moral grounds - stronger rights for workers and a reduction to ‘zero hours’ exploitation are hard to argue against per se. The broader array of changes in the Act, however, have the inevitable consequence of making each new hiring decision riskier and therefore more expensive. And if those decisions get harder to make, the brunt of the impact will inevitably be felt by the young, who represent a riskier hire in the first place.

Taken together, then, all of these changes mean that the attractiveness of a young first time employee to a potential employer has reduced over the last few years - not for any reason under the control of the young person but as a result of economic policy choices which have made their case harder. Before we get too stuck into arguments about “the young don’t want to work” or “they are all snowflakes” we should consider the way in which policy changes have made their lot much more challenging.

This, then, is something that the Government may want to consider as it looks to reduce youth unemployment and the dreaded NEET figure (Not in Employment, Education or Training). How best to balance a well intentioned desire to remove exploitation and create ‘better’ jobs with the basic economic reality that increasing the cost of employment reduces employment.

That will, I suspect, require bold choices. Why not do something big and brave with Apprenticeships, for example, to replace the broken and ineffective Levy system? Why not support blended education and work in more creative ways?

And, of course, why not recognise that the two biggest engines of part time youth employment and training that the country has are the retail and hospitality sectors and give us the support we need to get the country working again?

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From a hiring and retention point of view, the macroeconomy is a bit of a perfect storm right now. A well documented collapse in graduate recruitment means thousands of applicants chasing fewer and fewer roles, and the Government’s apparent strategy of making it more expensive and riskier to hire anyone is having a similar effect across non-graduate roles too.

Now if you are very short sighted, one response to that as an employer is to rub your hands with glee at the way the market has become a hirer’s one rather than a candidate’s one.

And it turns out there are plenty of such short-sighted employers out there. Just ask anyone going through that graduate recruitment mill - 6 layers of automated video based ‘tasks’ over 2 months before getting a cursory rejection note without ever meeting a human being along the way. An almighty contest between AI recruitment and assessment tools and AI tools designed to apply for as many roles as possible is underway, leaving the bewildered candidate out in the cold.

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Now it may be that there are some employment sectors where that works out just fine - where recruitment is a numbers game and new starters are just cannon fodder to be processed through ‘the machine’.

But if you work in the retail or hospitality sectors, or frankly any business where building connections and having conversations with customers is important, then you’d be a fool to think that is the right response to the current job market.

Over the years, I’ve seen many businesses succeed and fail for lots of different reasons, but if there is one thing that tends to unite the winners it is that they have succeeded in becoming places in which their colleagues actually want to work. Businesses that invest in recruiting properly, that spend time and energy on internal communications, which train and incentivise their colleagues and which put the ability to solve customer problems at the heart of what job success looks like win in the end.

The purest example of that is one I’ve written about before here on Moving Tribes. It is an observable and repeatable fact that the single most powerful indicator of NPS scores or any other measure of whether a customer has had a good time in your store or restaurant is whether or not someone said “Hello” when they first walked in.

That isn’t, of course, because there is something magic about that word. It is because a cheery greeting is usually a sign that everything in the store model is working - colleagues want to be there, are confident they can deal with anything the customer brings up and know that being open for discussion and questions is the fastest way to make a sale.

Getting that magic mix right, however, is difficult. Getting to the point where central teams feel connected to customers’ experiences in store, where store managers feel supported and understood by the centre, and where store teams are tight-knit and have each others’ backs is the result of masses of hard work.

Here, though, are some things I find to be common indicators businesses are getting their people game right (“maximising their human capital”, if you want to sound like a dystopian sci-fi novel):

• They have clearly articulated values, and stick to them. (The test of which is that colleagues in far-flung stores are confident that when they make a decision based on those values, the business will back them).

• They hire carefully, recognising that ‘hire for will, train for skill’ is the winning formula and focussing when they bring someone on board on whether they will get on with their colleagues

• They communicate, a lot. Business results updates, discussion of new projects, celebrations of successes and recognition of colleagues are all normal, not exceptional

• They invest in training and development (if you are business that lives or dies on colleagues selling to customers, why is training the first budget to cut, rather than the Boardroom lunch bill?)

• They keep the customer front and centre, making sure their values and the way they bring them to life for colleagues means doing the right thing for the customer every time.

• They understand that every employee matters - whether in a store, delivering to a customers home or making the machine work in head office or a warehouse.

How does your business do against that scorecard? Indeed, do you think I’ve missed anything - comments are open below if so.

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The very fact that so few businesses get all of this right is testimony to the fact that it is difficult. It means investing when the temptation is to cut and save. It means making decisions that are short-term costly in return for longer term results.

But the best businesses will recognise that the current difficult job market is not an excuse to avoid these calls, but a huge opportunity to double down on them. There is a massive talent pool out there to be tapped, and if you can create the right opportunities you can make your business a target and a home for the best people out there.

As an example, it might aggravate you, as it does me, that the current Government has persisted with the same broken Apprenticeship Levy model that the last one introduced, but don’t let Whitehall myopia stop you - find creative ways to use the levy (or indeed, create your own Apprenticeships) and you’ll find a ready pool of people both in your current workforce and outside who want to learn, develop and grow with you.

Any observation of the winners and losers on the High Street makes clear that investing in becoming an employer of choice is the best decision any consumer brand can make.

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When I wrote Reinventing Retail way back in the ancient ‘before times’ (OK, 2019), I used the phrase New Normal to refer to the way that the world in which retail businesses operate is now so completely different than it was a decade earlier, driven by changes in both technology and consumer behaviour.

Little did I know then, of course, that the approaching Pandemic would mean that ‘New Normal’, along with ‘Unprecedented’ would become hugely over-used parts of our language for entirely different reasons as we grappled with societal shutdown, fear of a brand new illness and the loss of many of the social ties that bind us all together.

Oddly enough, though, I think that much of the way we live, and try to do business, in this decade can be traced to the interplay between these two great shifts in ‘Normal’ - the technology revolution on the one hand, and the lasting impact of the Pandemic on the other.

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As I write this, it is grey and raining outside. For a great many readers of Moving Tribes working in consumer-facing businesses, ‘grey and raining’ will also be a pretty fair description of how they see their markets coming into 2026 too. As the dust settles on Christmas and January sales, it is clear that whilst some sectors (food) did OK, many others were distinctly lacklustre. Retailers report, both publicly and privately, that trading was distinctly subdued over the period with customers very careful about parting with their money.

That doesn’t mean that no retailers did well, only that the trend from 2025 of a widening gap between the winners and losers in each retail sector will have continued as everyone scrabbles for business and customers choose the strongest offer in front of them.

So how is that the result of the overlapping impacts of our two New Normals? And what does that mean for the rest of this year and beyond?

Let’s start with the Pandemic. Quite apart from all of the social upheaval and personal tragedy that Covid 19 caused, it was also a huge economic shock. No matter how you analyse it, we spent a long time in the early 2020s with many industries almost entirely shut down, and huge portions of the workforce being paid by the Government to stay at home.

The lasting impact of that economic shock is still with us. We are effectively poorer as a country, and meanwhile the Government, whatever its political stripe, is having to squeeze us hard in taxation to pay the bill for Furlough. The UK economy was already in poor health going into the Pandemic having recovered from the 2008 financial crash more slowly than many other countries. This more recent shock, then, was more than enough to ensure that we end up with a period of virtually zero growth, squeezes on real incomes and consequently demoralised, angry and financially constrained consumers. No wonder most retail and hospitality markets are struggling.

The second New Normal, that sea-change in how retailing works which I documented all the way back in 2019, has also not gone away and represents a permanent change in how consumer businesses need to engage with consumers that many are still struggling with. The essence of the change is perfect information. Rather than wandering my High Street looking for someone who sells what I want to buy, I now have all the prices and offers for every product sold anywhere in the world in my pocket.

That fundamentally changes the role of a retailer, from being a distributor of products (buy them wholesale, put them on a shelf, wait for someone to buy them) to being a business that needs to actively convince customers to buy from them, not some faceless online warehouse. The implications of that shift in the power balance between consumer and retailer has profound implications, some of which we’ll revisit during 2026 here at Moving Tribes.

What does all of that mean for the business climate in 2026?

Certainly it means that the macro-economy is going to do your business no favours. It is very hard to see a return to economic growth happening, taxes are not going to go down, the regulatory environment is not going to ease and consumer confidence is going to remain subdued.

So far, so depressing. But underneath all of that, there remain terrific opportunities for those businesses which choose to grasp them. As much as the change that technology has altered how consumers shop, it has also created new ways to connect with them, to build your brand and to bring people into store.

And even whilst the economy is difficult, those retailers who arm themselves with a clear understanding of how they can help their customers and who create retail experiences that provide the value and reassurance that those customers want can still do well. Just look at food retailing where it is plain to see that there are winners both at the value-reassurance end of the spectrum and at the premium end - what unites the winners and separates them from the losers is retail execution, nothing else.

Over the next few posts, then, let’s explore some of what we need to do to connect with customers and gain market share in what will be an otherwise pretty difficult business environment. There is no use wishing for the wider world to change, all we can do is focus on our own businesses and control the things we can control. Let’s do that together.

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The press this week is understandably full of articles urging the Chancellor to do this or that in the Budget tomorrow. Whether that is “please tax the rich” messages from the Trades Unions, “please don’t tax the rich” messages from, well, the rich, or “please don’t tax us” messages from various industry trade bodies, there is a long queue of people keen to get their last push in before the big day.

Most of that, of course, is too late as even given the slightly chaotic nature of this year’s budget preparation it must be mostly done by now. Indeed some of the messaging can best be read as political positioning for the post-Budget inquests.

For those of us in businesses, however, that time has largely passed, and the best thing we can do is consider how to deliver our plans and execute our strategies for the remainder of this year and next, given what is likely to be the political and economic climate. (And for those of us in consumer businesses, that’s a particularly pressing topic given that Black Friday is this week - I wish good fortune to anyone navigating a big trading peak this week).

As is ever the case, the best option in a world of uncertain futures is to plan for the worst and hope for the best. Taking that approach, then, here are some things that management teams should have on their 2026 check-lists:

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Growth will remain low

Obviously it will be lovely if that turns out to be too pessimistic, but it is hard to see much sign of any of the likely outcomes from tomorrow suddenly turning on the taps. As we discussed in last week’s post, much of our economic sluggishness can be traced back to weak consumer confidence and I doubt a wave of “here are all the things Reeves has done wrong” coverage in the coming weeks will do much to change that. We should plan for an environment which has seen weak footfall and limited growth in spending to continue, and trim our sails accordingly.

The costs of doing business will rise

In addition to another increase in the Living Wage (which most forecast will be more moderate than in recent years), we can expect the indirect costs of doing business to be hit hard by, amongst other things, the impact of the forthcoming Employment Rights bill, which will likely increase the cost of getting a hiring choice wrong and result in businesses needing to be much more cautious about who, and how many, they take on. Lobbying on the final nature of the bill continues, but the pressure on the Government from their union backers will certainly mean that some of the changes that the business community has campaigned hard against will happen anyway.

Government spending will remain high

The big strategic choice that the Government really made in its first budget has probably generated too little discussion - it pushed up capital investment in the public sector hugely, and tomorrow’s budget will probably do even more of that.

That’s a mixed blessing for businesses. In the long run, a stronger state, better infrastructure, better transport links and a healthier population are all good for business. In the short run, all that spending creates opportunities, not just for businesses that trade directly with the public sector but also for those whose customers benefit too.

The other side of the equation, of course, was the reality that the bill for all of that spending last year largely fell on business, and particularly on consumer facing businesses like retail and hospitality, with inevitable impacts on employment and resulting in a great deal of private sector investment being postponed. This sense that an increase in the size of public sector investment can ‘crowd out’ private sector growth has been very evident in our economy over the last year and we can only hope is a lesson learned for the Treasury team.

The consumer, though, can be persuaded to spend

As we’ve reported here at Moving Tribes several times this year, there are still businesses out there doing well and reporting strong results. The lasting impact of this long period of suppressed demand has been a growing gap between the winners and losers on the High Street (and in other sectors).

If your offering is a strong one, well tuned to your target customer segment and well delivered by your colleagues across the business, growth is still there to be had. I’ve spoken to many businesses who have turned a long period of declining footfall into revenue growth by selling more things, more of the time, to the customers who do turn up.

That growth is just harder to come by that it once was. I’m reminded a bit of those property renovation shows in the 1990s where someone would do up a house and then brag about how much its value had increased. The reality was that all property prices were increasing, whether the renovation was any good or not. Nowadays, with a stagnant property market, you’d have to work much harder and be much shrewder to add value with a renovation (and surprise surprise, all those shows have vanished).

That’s the reality of business in this climate - a point of growth now is worth much more, and is much harder to get, than it once was, but it is still an attainable goal for businesses doing the right things.

This last point, then, is the one I’d encourage any business leadership team to take from this week’s budget noise. Don’t hope for a dramatic change of direction or a sudden boost in economic growth. House building is not going to suddenly jump up, those big public sector investment programmes will take time to deliver and consumer confidence is likely to remain subdued. With the added risks of a bursting of the AI bubble across the pond, a weak US economy leading to even more random tariff wars and the continued efforts of the Russians to destabilise Europe this is not a time for baseless optimism.

It is, though, a time for businesses do focus on doing what they do, as well as they possibly can. This is, as far as affordable, the time to be investing in innovation, in colleague training and development, in customer service and in customer experience. Growth, for your business if not for the wider economy, is out there - it just needs more than ever to be earned.

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A journalist asked me earlier this week whether I thought the late timing of the budget this year and the general sense of economic doom and gloom was affecting retail businesses.

At a macro-level this is indisputably true. Footfall into stores remains anaemic with the BRC tracking showing a drop overall of 0.7% year over year. Retailer results also remain fairly subdued and even those doing well continue to sound cautious notes about the coming year.

Taking a closer look, though, the detailed picture is not as bad as we might think. That same BRC footfall analysis shows that High Street footfall actually increased in October year over year and the wider figure (which includes shopping centres and retail parks) is, although negative, less negative than it has been in recent months.

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There has indeed, in the chatter between retailers, been some sense of the very weak market we’ve seen over the last couple of years ‘bottoming out’ a bit, which seems to support the picture the footfall counters offer.

In that sense, my answer to the journalist was that my worst fear (which was that the huge efforts being made by the Government to put the fear of God into everyone about the forthcoming budget would completely crater consumer purchasing) has not come to pass.

That’s a long way, however, from a passing mark for the Government in its handling of the economy. Listeners to the Today programme this morning will have heard the economist Howard Davies colourfully explain that if the Government were actively trying to slow the economy down he couldn’t think of many other things they could do.

And that opinion is also evident when listening to that retailer chatter. The decision to put a difficult tax-increasing budget 2 days before Black Friday, one of the biggest peak trading periods for many retail sectors raises particular eyebrows. I have a strong suspicion that whoever made that call had no idea of the clash with Black Friday, which only increases a sense that the Government is not as connected with the business community as it might be.

There remains, I think, a huge willingness for the stated agenda of the Government to succeed. The retail sector is crying out for the much-announced drive to increase housebuilding to actually happen, for example, as house-moves are a key sales opportunity for many of them. Real wage growth, productivity growth, low and stable inflation and better international trade links are all worthwhile objectives which will make a difference on the High Street, and it would be churlish not to acknowledge that there has been real progress in some of these areas.

There is also recognition of the tough decisions that need to be made on taxation and spending (not least because we are a sector which shouldered a disproportionate chunk of the taxation decisions in the last budget!).

It remains the case, however, that a key output measure for a Government that wants to drive economic growth is consumer confidence (what Keynes memorably referred to as Animal Spirits). Consumers need to be confident in their own employment, feel as financially secure as possible and believe that it is time to invest, in themselves, their houses, their families and their futures. When they feel all of that, they spend, and the economy grows. When they don’t, then any money they do earn they tend to save for a rainy day, and it is this structural increase in the percentage of income saved in our economy which is the real driver of low growth.

As such, it is not just the mechanics of the actual decisions in the forthcoming budget that will matter, but the confidence and belief they create. Much has been written, rightly, about the importance of the sentiment in the bond market and whether traders there believe in the strength of the economy. Equally important, however, is the sentiment of the consumer.

A shift, then, from the last 2 months of doom, gloom and the deliberate incitement of nervousness and fear is much needed. As we sit down to judge the budget, that will be the real measure of whether 2026 will see a real return to growth.

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Anyone listening to the Today programme on the UK’s Radio 4 yesterday will have been treated to a proper “school debating society” bust-up between Sharon Graham, leader of the large Unite union, and Luke Johnson, representing the business community.

There was probably, to be honest, more heat than light in the discussion (a lot of “you know nothing about business” and “businesses don’t care about the working people”).

The reason for the segment, however, was that we have hit a key point in the development of the Government’s Employment Rights legislation - how will it progress through parliament and will the sudden departure of Angela Rayner lead to it being watered down or delayed.

That’s a topic of critical importance to all of us. Whether you are an employer or an employee, changes to the nature of the contract between companies and workers will likely have far-reaching consequences, including some very hard to predict second-order effects.

Strip away the heat and venom from yesterday’s discussion and it boiled down to 2 opposing points of view:

• “Businesses have increased their profit margins in recent years at the expense of their workers, and a rebalancing of rights towards workers is long overdue”

versus

• “These proposed changes can only increase the cost and risk for a business of hiring a new employee, which will inevitably reduce hiring and therefore slow economic growth, which is in no-one’s interest”

So how to disentangle these apparently opposing views and get to something resembling the right answer? Helpfully, long time readers of Moving Tribes will realise that we’ve touched on these topics before and tried to inject some facts into the invective.

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Firstly, as any of you who work in a retail or hospitality business will already know, it is nonsense to suggest that businesses are increasing their profit margins, let alone at the expense of anyone else. In the post linked below I examine in detail the Unite study which suggested that businesses had increased their profit margins by 30% since before the pandemic:

The short version? Apart from a litany of statistical abuses, the analysis Unite did is simply measuring the wrong thing. Businesses survive or die based on their “return on investment” not their return on sales. So important is that ROI figure that the ONS actually measure the “net profitability of UK companies”, and the real answer is that it has been steadily declining for the last decade as business has gotten harder and more capital intensive.

How to reconcile that with the Unite figures? If you are selling fewer things in your store but at higher gross margins than a few years ago, then you are living this phenomenon - your return on sales (gross margin) has gone up, but the overall profitability of your shop may well be flat or declining.

It is also a bit rich to suggest that employers are benefiting at the cost of the workforce when the National Living Wage for someone over 25 is 40% higher now than it was in 2020 (£12.21 vs £8.72) - far ahead of the increase in consumer prices over the same period of about 27%.

None of that, however, should be taken as a blanket assertion that nothing in the Employment Rights bill is worth doing. The union leader’s central point about how badly some sectors of the workforce are treated under current rules is entirely valid. Again, we explored this in a previous post here at Moving Tribes:

In that summary of the state of the Employment Rights bill a year ago, I used an actual example of the contrast between the “our people are our biggest asset” language used in the annual report of a big regional hospitality player in the UK and the simply appalling employment contract the same business uses with front-line colleagues - effectively delivering a zero-hours environment by stealth.

It does remain, sadly, the case that there are too many businesses out there with poor employment practices, particularly for part-time front-line employees in shops, hospitality environments, call centres and the like.

And the cost of that is borne by all of us - people working in uncertain environments where they can’t plan their week, have no steady or reliable income and need to juggle multiple ‘gigs’ to make ends meet are not living the lives any of us have a right to expect in a wealthy developed economy.

They are also unable to contribute to the wider development of the economy - they can’t save, invest, buy property or do any of the other things that will generate the economic growth the country so badly needs.

If we are to unlock economic growth, then, the custodians of the Employment Rights bill have a very delicate balance to strike. They must, for reasons both moral and economic, find a way to eliminate the worst practices out there and give young people entering the workforce the security they need to build their lives.

They must also, though, do so in a way that doesn’t increase the cost of employing people ‘properly’, which many of the measures in the draft bill would have done - all that will accomplish is to put more cost onto businesses which employ a lot of people, and we’ve seen how well that went with the National Insurance increases.

A tricky balance, then, which will require cooler heads than a radio debate!

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Think about the big hospital in your nearest town or city. I’m willing to bet that way more people die in that building than in almost any other building in town.

Is it logical, then, to conclude that your local hospital is full of mass-murderers?

A moment’s thought exposes this fallacy. Hospitals are, by the nature of the activity they do, full of sick people. Indeed, the sicker we are, the more likely we are to end up in hospital. It is entirely unsurprising, then, that the hospital ends up being a place where lots of people, sadly, pass away. The morbid statistic on deaths is simply a result of the team in the hospital trying valiantly to save every patient, and belies the fact that they succeed in doing that considerably more than they fail.

The same fallacy is at work when we compare individual hospitals or doctors. The surgeon who has a comfortingly high success-rate for their operations might be brilliant, but might also just be someone who only ever takes on easy operations with a low failure rate. The surgeon, on the other hand, with a high fatality rate might be terrible at their job but might be a brilliant and highly skilled operator who only ever takes on the most challenging cases.

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Recognising this fallacy is important when we consider the challenging task of turning around an under-performing business. I was struck this week by this story about Frasers Group being attacked for the fact that some of the businesses it has bought have gone into administration.

There is a saying that buying a business or a share which is in decline or failing is like ‘catching a falling knife’ - tricky because it is easy to mistime it and lose your fingers.

The key question implied by that article is this. If you buy 10 businesses which are nearing failure and subsequently put 8 of them into administration, are you the butcher who killed 8 businesses or the hero who saved 2?

The answer is not straightforward. The case for the defence, made by the Frasers team in this case, is that these are businesses which would have failed if they hadn’t been purchased and which no-one else was willing to buy. Any resuscitation of one of these businesses is therefore a win, and if some of them go on to fail, that would have happened anyway.

I’ve made the same case myself in previous posts on the hysteria felt in some parts of the media about private equity businesses:

PE investors are very often, because of their high appetite for risk, the last owners of businesses which are performing badly or are in challenged markets. They also, again because of that appetite for risk, are happy to see a proportion of the businesses they buy fail as long as enough succeed to generate a good return. That means that many businesses fail after a relatively short period of PE ownership having been floated on the stock market or owned by a family trust for years before that. The challenge is to tell whether that’s because the PE business somehow ran them badly or because they were the only people brave enough to try to fix a nearly-dead business.

That isn’t often straight forward to work out, though. The idea that no-one else would have been willing to turn a business around rests on the assumption that there was a full and competitive sale of the ailing brand which the new owner won fair and square. That is often true, but not always - business sales can be complex affairs with the brand owned by one vehicle and the operating business by another, and with high levels of business debt also owned by third parties. All of that can leave a canny early investor in pole position when the whole thing comes up for sale.

It is also fair to say that many investors in distressed brands are clever financial engineers who put themselves in the position where a later failure of something they buy doesn’t really cost them that much. If carefully constructed, they are taking a one-way bet with a big upside and little downside.

It takes a case-by-case analysis, then, to really understand whether a brand bought by an investor which subsequently fails was “destroyed by a corporate raider” or “unfortunately failed despite valiant attempts to turn it around”.

What is rarely covered in the more pearl-clutching accounts of this kind of investment activity, however, is the huge amount of work which any of these turnarounds require if they are to succeed.

Often management teams will need to be changed out, systems rebuilt, suppliers who have been let down and unpaid need to be brought back into the fold, teams across the business whose morale is rock-bottom need to be re-inspired and customers need to be convinced to come back to a brand they believe has let them down or can’t be trusted with their money.

When all of that works and a brand is put back on the road to recovery it is an amazing thing to see, and it happens more often than you might think.

When it doesn’t, as we’ve discussed often in these pages, it is a tragedy for everyone concerned. Sometimes that is indeed because a bad or greedy owner has mismanaged things.

Don’t be too quick, though, to automatically blame the final owner holding the business when the music stops - they might just have been its last hope. The roots of a business failure are usually deep, and have been growing for some time. As ever, the world is more nuanced than black and white can portray.

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Regular readers will remember that a post earlier this year explored some of the ups and downs of working with AI.

I was reminded of that post this week when I was tagged in a LinkedIn post in which Andrew Thomas-Derrer of Artefact linked to a really very funny write-up of an attempt to get an AI to run a shop for a while.

The short version is that whilst Claudius (The AI persona involved) did some things well, most notably taking and adapting to requests and suggestions from his customers, he did pretty badly overall, selling things for below cost and generally not making much money.

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More spectacularly, he also had a number of hallucinations during the experiment, including at one point apparently deciding he was an actual human being wearing a blue blazer and a red tie and getting a bit upset when it was pointed out that he wasn’t.

All of that is amusing enough and leads us to the usual trap with these kinds of articles - the current experience was terrible enough that I could frame this post as “AI can never replace real shop managers” only to find that a couple of technological evolutions into the future it can do exactly that.

In fact, the point I really want us to take out of this story is one we touched on at the end of the post in January - that we should be careful when deploying AI-based technologies to use the right one for the right job.

Ask most people in business leadership roles what they think of AI and pretty soon you will realise that they are only talking about one particular type - Large Language Models. In a sense, that isn’t surprising because using LLMs like ChatGPT is probably the AI tech experience most of us have had as curious consumers.

It is ironic that this is the case, though, because LLMs are a relatively new implementation of AI principles, having come about really only as the existence of massive computing power has been matched by the existence of huge amounts of written data (e.g. your Facebook posts) for it to learn from.

In fact, much older applications of AI have impacted your life as a consumer for decades longer - in particular, Machine Learning models deployed on large blocks of numerical data about customers and their purchasing habits, which have driven loyalty schemes, direct marketing campaigns and digital advertising for much longer than LLMs have even existed.

Notwithstanding that, the LLM is a powerful tool. In recent weeks I’ve used ChatGPT to:

• Read and summarise a huge Powerpoint document, and pick out the key talking points.

• Generate the Python code necessary to scrape and process some web data

• Sort out a particularly nerdy Linux problem

• Come up with a set of holiday itineraries

And more. And by and large, it has done those tasks really well.

But, in every case, I have checked its work manually before making any decisions that would be expensive to reverse.

Why? Because an LLM is simply a programme which has read as much content as it can, and synthesised it into an ability to construct sentences of its own.

Imagine a parrot that had read the entire internet.

You’d probably get some interesting anecdotes out of it.

You might even ask it some questions (tell me everything about the Cuban Missile crisis).

But I’d be very surprised if you asked it for investment advice, or to generate your business strategy for you, or to diagnose the odd pain in your elbow. Because in the end, it’s a parrot.

The same is true for your favourite LLM. Having read so much, it is brilliant at tasks which require reading or producing lots of text. That’s why it is good at summarising long documents, or producing essays for wayward students. But it does all of that without really understanding anything it is saying. That’s why it is prone to random hallucinations and to simply getting answers wrong.

AI tools will be useful for a huge range of the tasks we have to do in our businesses, whether that is talking to customers via chatbots or working out your optimal pricing and promotional strategies.

But surprisingly few of those successful applications will be simply asking an LLM to produce an answer for you. Maths based applications like Machine Learning will remain the best way to process large amounts of data, for example.

When you are seeking advice about how to use AI to improve your bottom line (and I’ll bet you are asking those questions already) the real secret is to figure out the right tool for the job you are asking for help on.

Get that wrong, and you might end up with a parrot making a mess all around your business.

We’ve touched before here at Moving Tribes on Business Rates and their disproportionate impact on the retail and hospitality sectors.

In that post we discussed the fact that the retail sector, as an example, pays about 20% of the Business Rates bill whilst only being 5% of the economy, and also observed that Business Rates, as a tax you pay regardless of how well you trade, acts as a barrier to risk-taking and investment.

At the time, I suggested a number of options to make things better, including rebalancing the rates bill towards, for example, online retailers to better balance things, or considering replacing it altogether with a tax that better reflected economic activity in the modern era such as a tax on sales or profits (both of which, of course, already exist and could be adapted accordingly).

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So what’s happened since then? Well, the good news is the government have acted - the Non-Domestic Rating (Multipliers and Private Schools) Act 2025 was passed into law in April and will take its effect in 2026, with the key rateable value multipliers being announced in the Budget in the Autumn.

The Government essentially took the first of the options I highlighted in that previous post. The essence of the new bill is to split Business Rates multipliers into three bands - one for very small sites (where current reliefs apply), the ‘normal’ rate and then a higher one for very large sites with a rateable value of more than £500k.

The idea is that the high rate on larger sites will hit those big online retailer warehouses, and allow a lower rate for ‘normal’ businesses operating on the High Street and elsewhere. The rates themselves will only be announced at the budget, but the bill sets some limits. The higher rate can’t be more than 10p above the normal one for example.

According to Savills, there are 16,780 properties in England that have rateable values of £500,000 or more, representing 0.84% of commercial properties but nearly 60% of the total rateable value.

On the face of it, then, this looks like a win for most businesses, at the expense of a few large ones.

Job done? Well, not when you read a bit more closely.

First of all, that 10% limit on the difference between the higher and normal rates really limits the potential impact even on regular businesses - if you start charging everyone (roughly) 55p in the pound for business rates, as is the case today for all but the smallest sites, then the biggest rebalancing you can do to raise the same money is to make it 59p for large sites and 49p for normal ones - better, for those smaller businesses, but not life-changing, I suspect.

And that is before the question of whether those 16,780 properties are all ones you want to tax at a higher rate. Tempting as it is to hope that they are all big online warehouses, this list includes offices, industrial sites, hospitals and more - a long list of special cases which will no doubt be lobbying hard for exemptions and reliefs. It would be odd indeed for the government, for example, to put more money into the health service only to take it back in the rates bill. Oh, and 20% of those sites are actually shops - the business rates bill on Regent Street, for example, will be going up too.

Fundamentally, then, the new bill will represent a pretty minor rebalancing and will leave businesses in the UK still essentially paying a lot of tax which is a function of the building they occupy rather than the trading that they do. It will remain a ‘deadweight’ cost for businesses that they have to pay regardless of market conditions or trading success. And the fact that the tax bill hits retail and hospitality businesses particularly hard will, although slightly improved, remain broadly the case.

The fight goes on, then. Increasing the taxes that businesses have to pay before they even start to trade (business rates, employers’ NI, pension reforms, the apprenticeship levy and others) makes it harder and less attractive to open a new location and makes businesses more and more vulnerable to downturns in trade.

Our sectors need to campaign, then, not for marginal reforms but for a complete revamp of how business is taxed. The government needs revenue from taxation but it also needs economic growth, and to achieve both of those together is going to require a fresh look.

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As IT teams in retailers up and down the land scramble to protect their systems from the current wave of ransom-ware attacks, I’m reminded of one of the most interesting business lessons from the pandemic.

And the most visible sign of that lesson was a plastic screen.

As consumers, we all remember the screens that went up in supermarkets and other essential retailers to protect customers and store colleagues from infecting each other. They arrived at about the same time as a lot of other emergency measures - one-way signage stuck on floors, endless bottles of hand-sanitiser and all.

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The remarkable thing about these responses to the pandemic was how quickly they were implemented, at scale across the country. Anyone who has existed in any kind of corporate environment will recognise with a wince that if you’d tried to have a conventional Project Initiation meeting about putting plastic screens up in stores endless debate would have ensued. Where will we get the screens from? Who is going to fit them. Have we done an assessment of whether they can be attached to till points securely? Does drilling a hole to fit them create an electrical risk? Who will be doing the fitting and are they qualified? Which stores will we do in which order?

In end, the project would have taken months.

But instead, in response to an external crisis, businesses somehow just ‘got on with it’ and made the change happen in days instead.

And it wasn’t just physical changes like these which seemed to happen at lightning speed. Process changes in store, for example to manage and restrict the number of customers allowed in at one time, were also put in as a matter of urgency, and many of the ‘core’ processes that a store operates like deciding staff rosters and organising delivery schedules also had to change beyond recognition.

Even retailers which were deemed non-essential and therefore closed had to find this same change-energy as they rescheduled deliveries from suppliers, figured out how to furlough colleagues and started to manage their finances differently.

Why this reminiscing about what happened 5 years ago?

There is a powerful lesson in those incredibly fleet-of-foot responses to the pandemic, and it is that when faced with a truly existential crisis we can make change happen in our businesses much faster than sometimes feels possible.

That is a lesson being relived by many businesses today, not only those worried about cyber-security but those having to re-tool supply chains in response to tariffs and other global factors too.

There is, though, a delicate balance for a leadership team to strike. I often test businesses by asking “this thing that we think will take 6 months - if the business’s existence absolutely depended on us doing it in 6 weeks, could we do it?”.

The answer is usually (after a bit of pushing) that it is indeed possible to make change happen quickly - that is, after all, the lesson from all that pandemic work. But doing so often means taking more risks, and also means deploying lots of people very quickly in a way that can be very disruptive to everything else that is happening in the business.

And there is the dilemma. The seemly frustrating change-management processes that feel like they are slowing everything down are really structures designed to allow lots of different changes to happen at once without everything falling apart.

You can bypass those processes and get an individual change to happen much faster. And sometimes that is the right choice to make, such as when that change really is of existential importance. But it is tempting to play the “just get on with it” card too often, and doing so can be a recipe for dangerous chaos.

The lesson - be aware that you have the power to make rapid change happen in your business, but have the discipline to know what that is a choice you should make.

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Following a few weeks when the retail sector has seen cyber attacks hit a range of well-known brands, with Marks and Spencer still trying to sort out the chaos in online ordering, payment processing and customer order management that a ransom-ware attack has caused, it is appropriate for all of us in business to consider how strong our defences are.

This isn’t, however, going to be a post about SQL Injections, Man-in-the-Middle attacks or any other technical wizardry - I’m certainly not the person to write that article. This is, instead, going to be about the biggest weakness your technology has for a potential attacker to exploit - you.

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The M&S coverage prompted me to dust off and re-read my copy of the book illustrated at the top. Kevin Mitnick was a very famous hacker and in later life the author of a number of works about cyber-security. The Art of Deception, however, is probably the one we should pay closest attention to, because it describes in detail the hacker’s greatest weapon - social engineering.

What does Mitnick mean by social engineering? He describes a broad variety of ways in which a resourceful villain can use basic human traits to get people to give him or her all sorts of information which can then be used to attack or steal from a business. Those basic human traits include our natural tendency to trust people, our gratitude when someone appears to do us a favour (and our desire to return that favour) and the way we make assumptions based on social cues.

Consider the following sequence of events, which I’ve adapted from the book to be particularly relevant to worried retailers:

• Someone in your Woking store gets a call from a customer - who explains they were so delighted with some recent service that they want to write to Head Office to compliment the team. Could they have the name of the manager, and the Woking store’s reference number?

  • Who wouldn’t be delighted to get that call? They cheerfully explain that the store is number 817 and the manager is Bob Jones

• Someone in your IT team gets a call from someone explaining that they are Bob Jones from 817 Woking. ‘Bob’ explains that he has screwed up - he has a new starter sitting in front of him right now and forgot to get system access set up for her - could the team do that for him now, and he’ll pass the details on to her.

  • Two pieces of social engineering are going on here. Firstly, Bob’s casual use of company terminology makes it easy to assume he is who he says he is. Store reference numbers are hardly a secret, but who would bother to describe themselves as being from 817 Woking except someone really working there, right? Secondly, by explaining that he has screwed up Bob immediately puts the IT worker in a position where he or she can solve the problem - our natural inclination to help kicks in.

I don’t need to continue that chain, you can see where it might go now that the hacker masquerading as Bob has a name, a store number and a login to the company’s systems.

In reality, social engineering will be a longer and more complex process than that, but the underlying basics - learn some company terminology, get good at pretending to be an insider, use information gleaning from one call to enable the next - are common tactics.

And all of this telephone-call based social engineering is just one of a range of tactics a potential attacker can use.

Email, for example, is a well-known weak spot because a well-crafted email can look like it is from a reputable source but contain disguised links to sites that can make your business vulnerable. That might include links that install secret programs on the unsuspecting recipient’s computer allowing hackers access. Or it might include links to sites that look exactly like something the user would expect to see, encouraging them to enter their username and password, which the hacker will store and use later.

Even more astonishing, however, is how easy it is for a skilful social engineer to simply walk into one of your offices and start working on your technology directly. I’ve seen several businesses over the years hire security consultants to see if they could get unauthorised access to one or more sensitive buildings and I’ve never seen them fail. One such consultant submitted as his final report a picture of himself eating in the staff canteen with a load of new friends he had made!

So the reality, especially for a retail business with hundreds of stores, thousands of colleagues spread across the country, a set of warehouses and one or more head offices, is that you are vulnerable to social engineering attacks from a range of directions.

So what can you do? The good news is that there are established ways of trying to ‘harden’ your business to these attacks. Apart from the actual IT investments you can make in securing your systems, most of the defences against social engineering attacks are about processes and training. Are your teams trained to assume that no call is internal unless they have checked? Do you enforce the wearing of company ID on site? Do you run regular practice drills on spoof emails by sending them out yourself and explaining to anyone who falls for them what they should look out for in future?

As these last few weeks have shown, a little investment in this kind of training could deliver a very high return indeed!

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So said Benjamin Franklin at around the time the US Constitution was written. It seems appropriate enough that around the time that same constitution is being tested to within an inch of its life, the current US president seems set on replacing taxes with tariffs.

Appropriate in one sense because, of course, tariffs are just rebranded taxes in any case (who’d have thought it would be a republican president who would enact the most swinging tax increases of the modern era?).

The quote, however, is relevant for those of us running businesses for another reason too. When the largest economy in the free world is hell-bent on changing the rules that have driven the global order for decades, and on doing so in a way that seems capricious and liable to change at any point, very little “can be said to be certain” at all.

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Uncertainty is corrosive for business investment, and therefore for productivity growth and the wider economy.

Why? Let’s consider the maths. When you make an investment, you are trading away some money today (the cost of the investment) for (hopefully) a stream of returns which will come your way in the future.

Obviously you hope that the stream of returns is bigger than your initial investment, but there is maths explaining by how much. If you lend someone £100 today for payback in one year’s time, you are depriving yourself of the opportunity to earn interest on that £100 over the year if it sat safely in your bank account. You are also taking a risk, however small, that the money is never repaid. As such, you would expect, just as a bank does, to be repaid a bit more than £100 to compensate you for those sacrifices and risks.

Economists turn that logic into formulae which allow you to work out whether the investment you are making is worth doing or not, but the core ingredients of those models are the same - the basic “safe” rate of interest you would get by just keeping the money in the bank, and the additional ‘risk premium’ you should demand based on how risky the investment looks.

The current wave of tariff madness hits that equation in 2 ways. Firstly, by creating inflation it will increase interest rates, which means that the ‘safe’ rate of return will go up - that raises the bar on investments by making the ‘do nothing’ case more attractive. (Another way of thinking about that is that rising interest rates increase the cost of any debt you need to take on to fund your investment).

Secondly, the unpredictable impact of US policy around the world obviously also increases the riskiness of many investments. If you are building a new factory to expand production, what is the danger that a closed-off US market means there is no demand for what you are making, or that a recession-hit China decides to dump their version of your product into your market at an unsustainably low cost?

Tempting, then, to stick every major project on hold. There is a beguiling logic to ‘wait and see’.

Savvy businesses, though, will remember that risk also presents opportunity. If others in your sector are retrenching or over-cautious, does this represent the moment to steal a march - invest in that new technology that will give you a cost-advantage, or expand into that new market when others fear to do so?

That’s all the more true when you examine the recent historical lesson provided by Covid. Once the worst of the pandemic was deemed over, all the super cautious businesses who had hunkered down during lockdowns decided to go for growth all at the same time, and the result was inflationary chaos as global supply chains clogged up and the price of everything soared. A challenging and uncertain economy might present you the best prices you will ever get for the goods and services you need to expand your business.

It has long been a business cliché that ‘the brave invest when everyone else fears to’ and that businesses who invest against the cycle in recessionary periods do better than their competitors in the long run.

This next period might just provide you with the opportunity to prove that cliché true for your business too.

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The last few days have presented a series of data-points that offer us a glimpse into the rest of the year and the risks and opportunities which are likely to present themselves to consumer businesses. I’ve picked out three:

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• Most recently, yesterday the Chancellor and the OBR offered up a view of the near term performance of the economy - the headline being short term sluggishness but a chance of longer term growth.

• Earlier in the week, UK inflation figures came in ever so slightly lower than forecast, though still higher than target. They included a very unexpected deflation in clothing prices and almost zero inflation in furniture and household goods, but worryingly sticky figures for a number of other retail sectors.

• And last week brought an even more practical insight into the rest of the year from, all places, Wetherspoons.

Say what you like about Spoons, it is an indisputably well run business which operates 796 pubs around the country that seem to be doing good business all day with a strong beer and food offering. In its last full year of trading it did just over £2bn of turnover from those sites.

So why mention it in an analysis of the current economy? Because beyond its success in selling all day breakfasts, it tells us two important things:

• Firstly that, like most consumer businesses, it trades on pretty low net margins - that £2bn of revenue turned into £140m of operating profit, a 6.8% margin, which in turn becomes £58.5m, or a 2.9% net margin, after interest and tax costs. These are very healthy figures by comparison with many others in retail and hospitality, but still show starkly that even a business with huge scale like Spoons is only ever a small sneeze away from breakeven.

• And secondly, the interim results they have just published highlight exactly one of those sneezes. The business calculates that the incremental cost of the increases to National Living Wage and employers NI will cost it £60m a year. That’s right - almost half of its operating profit gone.

So if we try to turn these three data sources - the OBR, the ONS and Spoons - into a set of watch-outs and ideas for other businesses, what kind of list do we come up with? Here are a few thoughts:

• The massive cost increases created by the NLW and NI hikes can only, in the end, translate into further inflation. It will be important for every business to be ready for that - try to increase your prices too early and you’ll get caught out by your competition, but leave it too late and you’ll see your input costs rise before your prices do, turning those thin margins into dust.

• On the other hand, there are also lessons from the current inflation figures about the consumer marketplace too. The reason clothing prices fell in the period is that more retailers than last year had to remain on sale in February. That shows just how hard they are having to chase a consumer who has little confidence in their economic future (as the GFK consumer confidence index illustrates). From the retailers I speak to, that phenomenon is not limited to the clothing sector - everyone is having to fight hard for business.

• There are, however, some green shoots in the economy if you look hard enough - real wages are rising and interest rates are coming down, and whilst those have not yet translated into increased consumer confidence it does seem likely that they will do soon, and as has been the case throughout there are successful retail and hospitality businesses producing good results from market share gains.

Now all of this soothsaying will, of course, be tossed and turned by the ever-changing US policy on tariffs and the impact that has on global trade wars. US tariffs have changed at least twice whilst I’ve been writing this post and will almost certainly have changed again before you read it. That uncertainty is bad for business, almost regardless of what the tariff policy itself ends up being.

And tariffs are not the only macro-risk. Freight rates and currency movements have been reasonably helpful for many retailers over the last few months, but we live in uncertain times and that could change on any given day.

Nonetheless, my advice for consumer businesses looking at how to get through the rest of the year remains fairly timeless. Focus on the things you can control, do the best job you can for your customers, keep a very close eye on trading margins and manage the inflation-game for the rest of the year carefully.

If there is one thing recent retail results show clearly, as we’ve reported here before, it is that those retailers who are growing market share by winning customers are turning in strong results, building their balance sheet resources and expanding.

The last thing you want to do in a weak market is also be losing market share - so more than ever, this is the time to up your competitive game. If your business really stands for something that your customers value, they will stick with you. Just ask Spoons.

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I have to credit the Daily Mail with the inspiration for this week’s Moving Tribes. In response to the massive Walgreens Boots Alliance business (owners of Boots in the UK) being taken private in an $18bn transaction, the Mail has managed to produce the single most hysterical (in both senses of the word) article about corporate ownership I think I’ve ever read.

If you don’t want to grace the Mail with a click, the sentiment of the piece can be summed up with one quote:

“Good businesses are slain and the private equity partners, enjoying the tax breaks which come with carried interest, benefit from a good life of private jets, yachts and lavish parties.”

Now I’d like a private jet as much as the next person, but sadly the article is vague about how you actually get one by slaying good businesses.

The thesis of the article, as the quote suggests, is that private equity owners are terrible custodians of retail businesses. Its robustness, however, is challenged by the fact that it goes on to cite the bankruptcy of Toy’s R Us (8 years ago) and Debenhams (5 years ago, having been owned by a private equity investor 15 years before that) but fails to mention any of the PE backed businesses which have done well over that period, or indeed the many publicly quoted or family owned businesses which have failed in the same period.

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Notwithstanding that, there is a perfectly good question about what the right ‘ownership model’ for a retail business should be. Is being floated on the public markets as a PLC better than being owned by a single private equity investor, or would the third option of being owned by a founding family or partnership trump both of those?

The awkward truth, though, is that the answer is that there are good and bad retail businesses in all three of these categories. Indeed, I wrote about the pros and cons of the three main ownership models extensively 2 years ago:

In summary:

• Being a PLC gives a management team lots of theoretical freedom (no powerful owners telling you what to do) but ties you to an expensive quarterly reporting cycle that can lead to lots of short termism

• Being owned by a private equity investor can mean having a lot of really clever professional investors advising and guiding you and liberates you from the short term reporting, but can mean the business gets stuck in a cycle of preparing for the next sale in a few years time and has also often meant businesses taking on dangerous amounts of debt in low interest environments that then become a huge burden when interest rates go up

• Being owned by a family or partnership can be great for long term planning and investment, but can also go horribly wrong when things get political, generations of ownership change or the business gets bogged down with committees.

Every model, therefore, has strengths and weaknesses which explains why, in just the last couple of weeks I’ve listened to private equity business bosses who can’t wait to float onto the stock market and also CEOs of public companies who can’t wait to take their businesses into private hands. In both cases, the grass looks greener on the other side.

So it is a fallacy to conclude that one mode of ownership is better than another. In fact, is the quality of shareholder and the quality of the Board and management that determine if a business will succeed.

There is plenty to be written about exactly what that magic formula of good ownership and good governance looks like, and it is a topic we will return to here at MT over the coming months. I hope that will make interesting reading for you, though I doubt it will reach the hysteria level to get picked up by the Mail!

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When you last went into a shop, how did the experience feel? I’d like to think that you had a nice chat, got some great recommendations on products and left feeling fulfilled and keen to return. Too often, however, the experience is a great deal less than that - with colleagues in store over-worked, under-houred, under-trained and so beaten down by retail theft and customer rudeness that the last thing they want to do is chat.

In this digital age, where algorithms predict our desires before we do, the humble brick-and-mortar store is fighting for its life. That’s been the focus of this Thrive in 25 series and this week we add to our recent posts about Experiences and Personalisation with physical retail’s most potent weapon: genuine human connection.

This is obviously an expansion of the ‘Experience’ topic. In that post, I listed as one of the possible experiences you could create in store as “frankly, just a nice chat about the weather and how awful the parking is”. It is that, rather than the more involved experiences that I’ve been thinking about since and which this post addresses.

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The last time I wandered down Oxford Street provided a great illustration of the good and the bad kind of retail interaction. Wandering into a cool(ish), new(ish) retail brand aimed squarely at teens and young adults, I found a store team who were obviously tired, bored and didn’t want to be there. The experience they inadvertently created was the exact opposite of the one that would encourage their target market to part with cash and there was precisely zero customer interaction going on. Wander a bit further up to Lush, on the other hand, and an engaged, interactive, cheerful set of colleagues was talking to customers constantly and showcasing exactly how it should be done.

For another example, I was struck by a visit to Lakeland in Cambridge a few months ago by the warm positive energy the team in store were generating and their ability to have, in just a short interaction, a nice chat with anyone wandering in who wanted one. That, and an informative exchange about silicon pastry cutters, marked the whole experience as much richer than their own website, let alone their pureplay competitors.

If we aren’t careful, we are in danger of thinking about our greatest asset - our colleagues in stores - as a cost to be engineered out rather than as what they are - our best line of defence against the internet warehouses. If our view of store teams is only as a cost line, then we end up over-focussing on speed and efficiency, at the expense of everything else.

But here’s the truth: people crave experiences, not just products. And a positive, human experience is the ultimate differentiator.

And it’s not just about immediate sales. A positive in-store experience fosters loyalty. It cultivates brand advocates. People remember how you made them feel. And in a world where everyone is shouting about discounts and deals, a genuine smile can be a powerful, resonant message.

Viewed through this lens, then, it is clear that regarding the money you invest in your colleagues in store as a cost to be ‘optimised’ (the cost of moving product from stock room to shelf and of managing the tills) is, for many retail businesses, completely the wrong lens to use.

Better, then, to consider your colleagues as ‘ambassadors for your brand’, there to interact with customers, explain things to them and generally make the store experience a more real and enjoyable one than clicking on a website can ever be.

Of course, this requires a change in approach. It means investing in training, not just in product knowledge, but in interpersonal skills. It means empowering colleagues to be authentic, to bring their personalities to the shop floor. And yes, it means hiring people who genuinely enjoy interacting with others.

Some retailers are already nailing it. Think of the charming independent bookstore where the staff are always ready with a personalized recommendation. Or the bustling local market where the vendors remember your name and your favourite produce. These places thrive because they understand the magic of human connection.

But too many retailers are still stuck in a robotic rut, treating their colleagues like automatons and their customers like numbers. They’re missing a golden opportunity to create a unique and memorable shopping experience.

Now all of this might sound a bit new-age and hippy, and of course it isn’t a mandate to stop thinking about the cost of operating stores at all. There will still be a ‘right’ number of hours for you to deploy in any given store in any given week. It’s just that the way you calculate that ‘right’ number is different if you are solving for ‘maximum impact on customers per hour deployed’ rather than just ‘what’s the smallest number of hours we can deploy without the store burning down’.

Solving this different equation is a difficult challenge for big retailers deploying thousands of colleagues in hundreds of stores. As business leaders, it challenges our norms in HR, Central Operations, Regional Management and Store Operations. All of these functions need to think differently if you are to put the value of customer interaction at the heart of your business. The questions they need to answer are more subtle and more difficult in that new paradigm.

That is a challenge worth rising to, however. For any retailer, whether a small indie with 2 or 3 long-serving colleagues or a massive chain with complex cost-management models, if you can unlock the power of your ambassadors you can lift your interactions with customers above the purely cost-based.

And that is a prize with real value.

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Thrive in 25 is a series exploring some of the ways in which retailers and hospitality businesses might break out from the ‘doom loop’ of rising costs and subdued consumer demand.

In last week’s post we covered how we might use ‘experiences’ to lift our customer offering beyond the basic ‘product for price’ equation. This week is the turn of another buzzword staple - personalisation.

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Again, long time MT readers will remember that we touched on this topic before, almost 2 years ago, sharing the story of the Japanese spice blender whose offering was that he’d make a 7-spice blend to your personal preferences.

Just like our growing desire for ‘experiences rather than purchases’, personalisation is a technique that taps into a deep need that our complex society drives in many consumers. When everyone can shop at the same shops, buy their coffee from the same brands and drive the same cars we yearn for something individual and unique to us - something that marks us as our own person and not just another figure in a crowd.

No wonder, then, that we see signs of this cry for individualism all around us - whether it is the tattoo, the personalised number plate, the overly complicated coffee order or stickers all over your suitcase. All around us is evidence that if we can give our customers the ability to feel individual, we are creating something that they value and will pay for.

So what does that mean for us in retail and hospitality businesses? There are plenty of ways that businesses, large and small, can harness the power of personalisation. Just consider:

• The limited edition product. Whether the phone in an unusual colour, the limited edition print signed by the artist or the garment made in a small production run, scarcity can create the feeling that you have something almost no one else does, and which is just for you.

• The bookstore that focussed on signed copies, or puts personalised book-plates into books for its customers

• The clothing store that allows a choice of buttons or trims or which will tailor a piece to the customer’s size

• The shoe store that recognises that not all feet are standard sizes and allows a customer to create their personal shoe profile and have that remembered for next time

• The perfumer that not only explains the scent profile of its perfumes but also allows customers to build their ideal profile and have it created for them.

• The off-license selling small runs of unusual craft beers or rarely produced Scotch

• The bike shop that will paint the frame of your chosen bike in your chosen colour

Even more straightforwardly, we can create an individual purchase for a customer just in the way we combine products together for them based on their interests or needs. Think of the time and space beauty retailers devote to offering makeup advice and tutorials - creating the feel for the customer that that combination of products has been brought together just for them.

For larger retailers there is also the opportunity to use data and insight to augment a personalisation approach. Spotting from past purchases what kind of limited edition products will appeal to a given customer takes some of the risk out of stocking them in the first place. And once your insight engine has spotted that a customer is one who really values the personal and customised, of course, then you can continue to build the relationship with them by offering them more of those options.

For my part, I remain baffled that when I go into even quite a high end coffee shop I can personalise the milk, the flavourings and sometimes even the cup, but rarely the actual coffee that is supposed to be the heart of the product. By the same token, look hard at your own shop and consider whether you’ve defaulted to ‘any colour as long as its black’ (or in the case of car dealerships, ‘any colour as long as its grey’!). If so, it might just be the case that there is value to be had in offering the next customer through the door something a bit different.

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