This morning’s news headlines were as stark as yesterday with regards to deals, bad deals and no deals, tension in Ukraine, shares dropping and the inclement weather has already abetted the cancelling of some trains. Just another day in the life of the UK. Whatever the origin of a company’s misfortunes, hearing negative news stories day in day out can really affect business and consumer confidence, so it’s crucial to continue focussing on your firm, the marketplace it operates in and sparking positivity at any opportunity.
We’ve chosen two recent global, rather downbeat, stories about profit loss and uncovered the positive opportunities that are hiding, in order to inspire you to keep up that good old Dunkirk spirit our nation is so well known for.
Thomas Cook, one of the UK’s favourite holiday tour companies, confirmed a £53 million loss and this has been attributed to the summer’s heatwave and last winter’s Beast from the East. In the last three months, Cyprus’ Cobalt Air, Denmark’s Primera Air and British carrier Monarch have all gone bust, with Flybe and Norwegian also on the cusp of disaster. While Brexit and the weak pound have certainly impacted the situation (certainly for Cobalt, with 30% of Cypriot air traffic usually coming from the UK), rising fuel costs are the root of many problems. Airlines capitalised on the plunging oil prices from three years ago, but they’re now paying top whack again, and it seems many committed to new aircraft, which has resulted in having more seats than passengers. This highly competitive market faces a future of flux and airlines Ryanair and Wizz Air have even added clauses to their conditions to disclaim liability for any flights grounded due to Brexit after 29 March.
What can SMEs Learn?
> Despite Thomas Cook’s woes it has announced that it will build 20 new hotels and build on its partnership with Expedia – an own-brand offering is risky in some ways, especially to keep its low costs, but profit margins will be higher and a robust affiliation could bring many more opportunities. Look for efficient partners and investigate ways to bring elements of your business in house.
> Identifying areas where you can make a real difference to your customers or clients could spark the loyalty your business badly needs – fuel costs or weather cannot be fully accounted for, so start with looking for ways to elevate the ‘experience’ you’re selling.
> Be wary of big purchases or leases, even when your books have never looked better. Forecasting and planning for the worst is important to ensure you have a sustainable future during turbulent times.
Everybody’s favourite Swedish store, Ikea, which has an outlet not far from Adams Moore, in Wednesbury, has suffered a 26% year-on-year drop in operating profits – a drop from 3.03 billion Euros to 2.25 billion – and 7,500 jobs (circa 350 in the UK) will be lost. However, we’ve chosen this story, as an example to look a little closer into bad news; here there is much more to tell, and it’s a plot that hasn’t yet played out to the finale. Ikea’s turnover in fact increased marginally by 2.1%, retail sales rose 4.7% and that included a 45 per cent jump in online trade. So what’s going on? The retailer has entered into a three year business transformation period that will focus on ecommerce and a city strategy, which has seen a Planning Studio open on London’s Tottenham Court Road. The upfront costs facilitating the brand’s evolution and store revamps has been responsible for the negative figures and 11,500 new jobs will be created, making a total of 4,000 additional roles, and no losses.
What can SMEs Learn?
> Ikea might appear to be moving forwards with an ‘all eggs in one basket’ approach, but it is carrying out tests in the market from an informed standpoint. Without cars, many city-folk can’t make out of town trips so accessible high street outlets will allow Ikea to grow its customer base – adapting and accommodating to changes in living habits, consumer desires and shopping conventions is fundamental to any retailer’s strategy, but undertake research and trials.
> Investing in online resources and technology is a positive move for the majority of businesses – online shopping seem to have been around forever, but it’s surprising how many SMEs don’t put the correct thought and capital towards future-proofing this area. Aim to add value and convenience through digital platforms and channels, but remember this is likely to affect distribution.
> Adding a different type of store in cities and pushing for more online sales puts a spotlight on broader channels of customer services. Businesses must be fully committed to their staff if they want to provide a great service, from initial awareness of products or services, at point of sale, and beyond. Empower employees to be your advocates as they are your business.
If you’re concerned about your businesses profits or what 2019 may bring for your company, please contact us for a free consultation where we can find out more.