Tuesday, 16th June, 2020
Once again, my update is too long. So much information, so little time. But you know that of course. Read on for my thoughts on the competitor landscape (yes this does apply to you), racing to the bottom, help with commercial tenancies and more.
Wishing you all well
Be on your toes people, be on your toes …. those competitors are all over the show.
One of the things I have loved about my career has been watching how creatively and quickly markets adapt to opportunity. As an inveterate watcher of companies, it is fascinating to see business managers spot an opportunity and move towards it. Over the last few months, I am seeing more and more examples of companies ‘pivoting’ and attempting to enter new markets to keep their staff and assets usefully employed. Just like the Government has suggested they do.
We have also seen government enter some markets, providing or funding free services, that has changed the landscape for many private businesses or organisations.
In many cases, businesses are being motivated by factors that are completely outside of the norm. Large companies with underutilised assets and staff are being motivated by a ‘just stay in business long enough to be part of recovery’ rather than ‘net return on assets or NPBT’. Those who depend on skilled migrant labour are determined to keep their staff working within their visa conditions, their price for recruitment being so high. Marginal companies, previously low risk, have been potentially given a lifeline by government cash flow lending and business advisory assistance. Businesses will consolidate into larger ownership groups as the impact of the downturn works it way through, we may see vertical integration of supply chains. The uptake of Zoom and virtual workplaces will change who and how we engage for consultancy services.
The end result? Your competitor landscape has changed. Take the time to stop and really look around at who might enter you market and consider how you might mitigate this risk. Both Qualmark (for tourism businesses) and Regional Business Partners are offering subsidised business advisory services. If you are doing a strategic review of your business, including a thorough competitor analysis in your strategic planning will be worthwhile. South Island wide business phone advisory services are also available for all businesses for no cost. I have updated all the contacts for these services and you can find them on the Chamber website here.
A pivot or a race to bottom?
Although it is interesting to watch markets react to opportunity most activity consists of simple ‘gold rush’ or ‘me too’ behaviour – a rush by businesses keen to exploit a new found opportunity. Sadly there is very little evidence of true disruptive innovation – where we fundamentally alter the cost structure or way of delivering a product or service. Most pivots will likely involve an inexperienced operator entering an undesirable or well-served market with a lower price offer, not because they are able to demonstrate true disruptive innovation, but because they are prepared to pay their staff less and/or accept a lower or no net return. This is not the model that will lead to a strong recovery, it is a race to the bottom, with a much-reduced tax take that will impact on future generations. Saving a job in one company, in this instance will result in the loss of a higher valued one in another company.
It would great to see government policy in the future support those businesses whose business model clearly displays true innovation. In the meantime, if you are keen to drive your business really forward, and need a hand, Start Up Queenstown Lakes might be a good place to start. What about brushing up on start-up methodologies to really uncover where opportunity lies.
Update your business listing on our website
Our partners at the Auckland Chamber of Commerce have upgraded Business Search NZ and this is now on our website. Sadly, the content was not transferred from the old system and we need you to enter the content for your business now. However it is worth the effort because it now a powerful community for members to hold listings, advertise, network, engage, trade and explore. We have re-designed the platform to offer your business a new and wide range of features and functionality.
To register, go to the BSNZ platform HERE and complete the signup form. Once we receive your account information and confirm you are a member, we will authorise your BSNZ account, so you can begin working on your profile and listing. The approval may take up to two working days. HERE is a great guide to creating an attractive and effective listing. You’ll be invited to think about what your brand offering is, who your target audience is, how you are different from your competitors and what imagery best represents you.
Commercial tenancy disputes
On 4 June 2020, the Government announced further temporary measures to be enacted to specifically support small New Zealand businesses through the effects of the COVID-19 epidemic. Parties to many smaller-scale commercial leases will be required to negotiate the payment obligations to ensure a fair rent is agreed. Negotiations can be conducted in any way agreed by the parties, such as through mediation. Remaining disputes must be resolved through arbitration. The Government will subsidise streamlined arbitrations with up to $6,000 including GST per proceeding and up to $40 million in total. Read more about it here and discuss with your lawyer if you feel it may apply to you.
Information is power
QLDC recently commissioned Infometrics to provide some economic forecasting for the QLDC territorial area. This report was published in May and makes sobering reading with a 23% contraction in GDP by March 2021, 7900 jobs lost and employment to reach 18.5%. No information has been made available on any forecasts for tourism beyond this date, however forecasts to 2024 have been made available for construction. The full report can be found on here.
On the same page is a report, generally prepared weekly, by a QLDC analyst on social and economic trends which also makes interesting reading and may be useful for some types of planning or reporting.
For those undertaking workforce planning, MSD has a range of reasonably timely reports available for review, some of which go down to the QLDC territorial level, which may be useful. https://www.msd.govt.nz/about-msd-and-our-work/publications-resources/statistics/covid-19/covid-19-evidence.html
Immigration New Zealand has revoked Queenstown’s ‘special’ status with respect to demonstrating an unmet need for labour. It is clear, currently, that people on essential skills visas without work need to make plans to go home as soon as possible. Members are telling us that they remain concerned about how they will operate their accommodation, hospitality, and some activity businesses as we recover without the contribution of our migrant workforce.
This concern is reasonable, at present we have around 3,400 essential skills workers registered in Queenstown, many with partners and some with children. There was thought to be a similar number of working holiday visa holders. In 2019 QLDC territorial area had around 27,200 according to MBIE, so approximately 25% of our workforce is migrant labour.
Labour force planning is going to continue to be a vexed and extremely difficult issue over the next few years. The Chamber has, with the QLDC economic development team, completed our nominations for skilled representation on the interim Otago Regional Skills Leadership Group. We will continue to keep you updated on the representatives who are chosen by MBIE over the next few months.