Now or never: harnessing growth opportunities in retail

Published: Tuesday, April 16th 2024

Amidst a wave of layoffs in the tech sector, retail and consumer businesses have a unique chance to leverage cutting-edge technology and talent, creating an opportunity for growth and innovation.

If you’re not part of Big-Tech or Big-Finance, or Australia’s Grocery Duopoly, your business is likely navigating significant challenges. Investment in additional headcount, new systems, or process is probably quite a way down your list of priorities - behind a lot of optimisation, and just trading through the rough patch. However, for growth-minded organisations with some financial flexibility, there is an opportunity to acquire experienced talent to drive the next wave of growth and innovation for the business.

The COVID-19 pandemic forced a rapid acceleration in digital transformation, prompting businesses to launch many initiatives. Yet, facing economic pressures as consumers become more discretionary in their purchasing, many have since scaled back - delaying or descoping these projects.

Empty store for let Retail spaces have struggled to recover. Photo by the blowup on Unsplash

While Big Tech and Finance have been the main beneficiaries of what growth has happened in the last five years (eg the Magnificent Seven), they, and others, are now generating layoffs - about 50,000 people in the first two months of 2024 so far. As we emerge from the bottom of the business cycle, there is an opportunity for savvy Retail and Consumer organisations to benefit.

If your business is profitable, but faces cyclical challenges, such as Retail - right now you are able to pick up some extraordinary talent from big-tech and finance. Point them at your hardest business problems to get the groundwork done, and you can capitalise as consumer sentiment improves and spending increases again.

For the purposes of this post, I’m mostly considering Retail, Consumer Products and Services businesses as these are domains I know very well. Over the last six to nine months I have had many conversations with leaders in these sectors that have influenced my thinking on this topic.

In this post, I’ll outline some of the challenges businesses have had to navigate over the last couple of years, why tech firms are laying off staff, and what the opportunity is for organisations who can capitalise on it.

Consumer businesses - between a rock and a hard place

Even though COVID-19 dramatically impacted recent business performance, the challenges began earlier. 2018 and 2019 already posed significant difficulties for many organisations due to a decade of rising living costs and stagnant wages after the Great Recession, compounded by global events like France's Mouvement des gilets jaunes, Hong Kong's Water Revolution, and Australia's Black Summer.

Hong Kong protests, 2019 Over 1M people protested in Hong Kong in 2019. Photo by Joseph Chan on Unsplash

I highlight this pre-pandemic period because trying to hire into retail businesses was already challenging. Businesses didn’t have a lot of spare cash to invest in more headcount and candidates were already scarce. This was because Finance and Big Tech were already into their run up as they started to capitalise on technology advances to do with new architectural patterns (eg micro-services and composable architecture) and the first shoots of AI and ML technologies showing benefits (eg voice, NLP, classifiers etc).

The implication of this was that in consumer businesses, that were not digital pure-plays, projects were already falling behind and teams had persistent vacancies that were challenging to fill. Some outsourcing occurred to keep projects moving, but this is not sustainable long term due to the cost.

By March 2020, every consumer business in the world was facing the choice of willingly or begrudgingly expediting their entire digital transformation, or have almost certain collapse as a result of physical retail closing overnight. At the same time, Big-Tech saw a rapid increase in sales due to vast numbers of the population spending more time on screen and in their houses.

The net effect was that Big-Tech and, to a lesser extent Finance, found themselves in a position where they had money coming in at unprecedented rates and were able to attract significant amounts of talent with high wages, who could work from anywhere remotely and continue to drive their digital business growth. On the flip-side, consumer businesses were faced with the impossible task of completing two to five years of work in six months with increasing uncertainty around their jobs.

Consumer organisations that managed to stay afloat faced stiff competition for talent, often being outbid by tech giants like Google, Meta, and Amazon, where even junior roles commanded salary premiums of 40-90%, not to mention superior benefits. Vacancies continued to grow.

After COVID there has been a significant decrease in consumer sentiment and spending and consumer businesses have found themselves in a precarious position - grappling with significant revenue challenges lacking the willingness to invest in headcount or expensive projects. Throughout 2023 and into 2024, many organisations have faced into extreme prioritisation, scaling back initiatives and managing costs ever-more aggressively - a necessary, but short-sighted strategy, given the long-term potential of these projects.

In 2024, from my conversations and interactions with numerous organisations, this has become the dominant behaviour for many Direct to consumer businesses. Deliver core business well, drive profitability and, focus on a smaller number of high-value opportunities.

This all poses a question though: After an astonishing boom and the sustained dominance of Big Tech and Finance over the last half-decade, why are we now seeing continued layoffs in these sectors? This shift is not just a market correction for some COVID-19 over-hiring, but a signal of deeper changes afoot.

In the next section, I delve into the reasons behind these layoffs and how these underlying shifts may open a golden opportunity for consumer businesses in the next business cycle.

Inside out - tech’s first target is itself

It's well-known that new technologies can displace workers, typically those in lower-skilled roles, however the technology industry often focusses on itself first, automating its operations and optimising internally before seeking to impact other sectors.

This internal focus stems primarily from an ongoing war for talent coupled with a relentless drive for profitability.

Technology sectors have historically grappled with a persistent shortage of skilled workers. The demands on even entry-level technology professionals have escalated significantly over the past two decades, intensifying the challenge. Each year, the industry's demand for talent consistently exceeds the supply of new graduates, a trend that shows no signs of abating and looks to be getting worse.

Given this persistent context, for technology-led businesses a long-term beneficial strategy has been to invest heavily in automation to free up talent to work on more difficult problems. This allows you to scale by removing bottlenecks (instead of Jane being the only person who can do a task, now everyone in the team can leverage Jane’s automations and she can move on to the next hard problem) and it can drive profitability (I can have my team working on more innovation or higher value work that I can charge more for rather than routine work which quickly becomes devalued).

Working to digitise processes Photo by Scott Graham on Unsplash

No part of technology has been spared from this effect.

The virtualisation of computers spurred rapid advancements in automation, streamlining the management of virtual machines and networking. This evolution catalysed the growth of cloud-based infrastructure, which in turn facilitated more sophisticated applications and data management strategies. These technologies laid the groundwork for the development of complex machine learning pipelines and on-demand AI models, further reducing the need for extensive human intervention.

Despite an exponential increase in applications driven by these technologies and rising consumer demand, the workforce has not expanded at the same rate. Automation enables existing professionals to manage larger technology ecosystems more efficiently, thereby enhancing business value.

In recent years, AI's viability has surged. Before ChatGPT made headlines in late 2022, tech organisations were already leveraging early tools to automate code generation, content validation, natural language tasks, and data analysis, significantly easing the burden on overstretched teams.

As more sophisticated AI tools landed, this has been like pouring petrol on the fire of automation.

With cultures of innovation, optimisation and automation entrenched in most tech organisations, these tools have enabled even more rapid development and more value creation.

Given all of this, why would tech companies be laying people off? Surely they are better retained in the organisation?

In late 2022, the main factor was cost rationalisation. The boom that many tech companies had experienced was COVID related and those gains began to reverse. Many organisations decided to downsize for what looked like a recession and get ahead of that. In 2023, for many markets, this recession didn’t occur however business conditions were more challenging and those businesses that shrank their workforces were considerably more profitable (eg Meta, Microsoft and Amazon).

Recently, additional layoffs have occurred that are smaller in total size, however much more broadly based. Here too, businesses are rationalising their cost base to show higher margins and profitability to the market (the days of “burn baby burn” when it comes to cash with few profits are definitely behind us) however they aren’t doing away with whole teams. Rather, as various AI and automation tools are becoming effective they are taking a small chunk out of many jobs so instead of a team of 10 to do the work, this may be rationalised to a team of 9 instead. Hiring has much reduced from the heady days of 2020-2021 as well, with fewer roles advertised - particularly for entry positions.

An iPhone with many AI apps installed AI tooling for teams has multiplied rapidly. Photo by Solen Feyissa on Unsplash

When you look at the output however, you see the full picture - these slightly smaller teams are delivering the same output (or more in the case of Meta in particular). This is improving their margins and profit - so the rationale for downsizing the workforce is well founded.

A lot of this isn’t purely AI related, it’s the combination of opportunities brought about by cloud technologies, automation and AI that have taken time to pull together, however it is supercharging the productivity of teams.

These factors occurring concurrently provide opportunities for those businesses - particularly Retail - who are prepared to Zig while everyone else continues to Zag.

In the final section, I explore how to take advantage of these opportunities now and race ahead while your competitors are still putting on their running shoes.

Tech layoffs may be retail payoffs

The persistent challenges in the consumer non-tech sector have squeezed capabilities and hindered the delivery of transformational changes within organisations. Meanwhile, technology-led organisations have created disproportionate value by leveraging automation, AI, and data, relative to the size of their teams.

What should retail and consumer businesses do as digital sophistication rapidly increases but funding for innovation remains scarce?

Quite simply, you need to invest smartly but you need to go now - and I mean right now - 2025 will be too late.

Consumer and Retail businesses should seize the opportunity to strategically hire experts in Architecture, Data, AI, and Automation. Complementing these strategic hires with eager juniors currently struggling to find roles can maximise impact.

Start by hiring experienced team members who have direct, first hand experience in:

  • Architecting large, distributed applications and enterprise technology with composability at its core and micro-services throughout.
  • Data engineering to extract valuable data from the organisation and make it available to products and services.
  • Pragmatic AI capabilities whether in using off the shelf models for enhancing existing products or refining processes or leveraging AI-based tooling that can improve productivity (eg engineers with AI-copilot or AI-DevOps experience)
  • Automation engineers who can help remove tasks from existing digital and business teams and create opportunities for those staff to work on higher value activities.

To scale and innovate effectively, integrate enthusiastic early-career professionals into your team, supporting them with AI copilot tools and DevOps practices. This approach allows juniors to rapidly assume significant roles, driving forward your transformation objectives.

This addresses the hiring side, with a view of seeding these skills into the team. Alongside that needs to be a clear strategy that leveraging automation, utilising AI-based tooling and copilots and use of low or no-code solutions or frameworks to achieve outcomes is critical to the ability of the organisation to execute.

This focus on methods, and the change management required to support that in existing teams, should help to start to create momentum inside the organisation to deliver at a higher cadence.

Simultaneously, businesses must adapt by adopting AI copilots and adjacent technologies to automate processes, enhance classification, support services, and improve customer experiences.

Done right, this will help free up valuable time from over stretched staff who can work on projects that further transformation, work on supporting higher value customers or helping expansion into new channels or markets.

Additionally, the business should invest in low or no-code application platforms and extensively train business users in their use. Many of the market leading tools already leverage automation and AI capabilities for rapid delivery. Layered onto a composable architecture and a well understood integration ecosystem, business users can rapidly automate business processes, create micro-applications to service their needs, and deliver rapid change themselves. This will free up key technology resources to invest in innovation or high-value platform creation.

An image with the word change Create opportunities for organisational changes. Photo by Nick Fewings on Unsplash

While the outlined approach offers numerous benefits, it also carries inherent risks that must be carefully managed to ensure successful outcomes. Before embarking on this journey, here are some items to consider:

  • Prioritise architecture and full-stack engineering if your organisation lacks architectural maturity, such as insufficient micro-services or integration layers. This foundational work is critical in supporting the approaches discussed in this post.
  • Implement clear guidelines for AI copilot usage, focusing on data safeguards and team responsibilities to prevent inadvertent data leaks. Proper training and governance are essential in ensuring safe and effective use.
  • Support junior team members with robust mentoring and onboarding programmes to integrate into their teams. Strong cultural processes are essential for their success and future growth in the organisation.
  • Ensure the accurate assessment of capabilities in prospective candidates by possibly engaging an external 'Advisory CTO' or similar expert for advanced domains. This expertise is vital for recruiting senior roles, who can then assist in onboarding junior team members.

Retail and consumer organisations, whilst they start behind, have a golden opportunity to bring to bear a number of significant trends coupled with a specific set of people who can drive innovation and opportunity for the business.

In case of emergency, break glass

The convergence of available talent, cutting-edge technologies, and urgent innovation needs presents a unique opportunity for retail and consumer businesses. Capitalise on this moment by strategically hiring experts in architecture, data, AI, and automation, and support them with eager, early-career professionals. This combination will build a resilient, forward-thinking team ready for rapid innovation and deployment.

Act now. The talent is available, but won't remain so indefinitely, and competitors may also be eyeing this advantage. New technologies provide an opportunity for generational leap-frogging that will help you quickly create new opportunities for profit or elevate your customer experience. Don’t hesitate; those who act decisively have an incredible opportunity at their feet.

Imagine a future where your business not only survives but thrives, leading the rapidly evolving retail landscape. By acting now, you're not just adapting; you'll be setting the pace for innovation and success.

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About this post

Title
"Now or never: harnessing growth opportunities in retail"
Published on
Tuesday, April 16th 2024
Tags
ai strategy business retail growth
Author
ajfisher
Title image
ajfisher - Retail Innovation Opportunities - Dall-E 3
License
CC BY-NC-SA 4.0 International License
Permanent source
https://www.ajfisher.me/2024/04/16/now-or-never-growth-opportunities-in-retail/