Old-school industries begin the fightback
Newspapers. Package holidays. Shops. It would be hard to think of a more hopeless trio of industries, or three that are in deeper long-term trouble. All of them are being wiped out by ruthless online competitors, and face imminent extinction as their customers disappear and nimbler competitors steal their market.
Investors steer clear, and even the people in charge appear exhausted by the struggle to stay afloat. But hold on. Recently, there have been some signs of life emerging from the old economy.
Reach, the renamed Mirror Group, reported slightly better than expected figures yesterday. Travel operator TUI reported rising sales, even if profits are still challenged. Even retailing is showing some sparks, while cinema admissions are set for the best year since 1971 despite the rise of streaming. True, they are just glimmers so far, and none of it means that the challenges from the app economy are going to disappear. But it does show that bold and imaginative managements who are willing to reinvent their companies can still fight back.
If you had to put together a list of the industries that had seen the most damage from the rise of the internet; media, travel and retail would certainly make the top three.
Newspapers have seen a lot of their most lucrative advertising vanish, and have lost millions of print readers. The days of booking a week in the Algarve through a travel agent on the high street seem a distant memory, while town centres are starting to turn into wastelands as more and more retailers, unable to compete with online rivals, close down. Come January, after yet another poor Christmas, many will no doubt be calling in the receivers.
There are others on the way. Banking looks set to face massive disruption, so does property, and artificial intelligence may well rip through professions such as law and accountancy, transforming millions of white-collar skilled jobs. They are not there yet, however. The real wave of change, if it happens, is still ahead.
And yet no business is ever necessarily completely finished. Take a look at some of the numbers that emerged this week. TUI delivered surprisingly decent numbers. The world’s biggest travel operator, with brands such as First Choice, reported a 5.3pc rise in revenues for the year, ahead of estimates. There is nothing especially amazing about that, but it is a long way from extinction. Yesterday, Reach, which publishes the Daily Mirror and has taken control of the Express titles, reported in a trading update that its figures would be slightly better than expected.
Revenues are still under pressure, but digital sales are growing, and the merger was yielding savings. Even in retailing, amid the now traditional blizzard of pre-christmas sales and looming profit warnings, there are some indications that a few shops might be doing OK. JD Sports reported rising profits this year, and so has The Entertainer, the toy chain.
Of course, traditional businesses are still getting hammered. There is no evidence that people are switching off their smartphones, and the Amazon delivery vans will be just as busy over the next week. But the best managers in the old economy are working out how to deal with it.
In travel, for example, TUI had been concentrating on areas such as cruises, or opening its own hotels, and on offering options such as cookery classes in Italy. It has started to move into more in-depth holidays instead of just plonking families in Greece for a week. That is now paying off. In the media, companies are having to slim down and rationalise, but at the same time are working out ways of building digital revenues through new products and new ways of charging for content. Meanwhile, the smartest retailers have realised that if they can reinvent themselves around experiences and services, then they can still prosper alongside their digital rivals.
Sure, lots of bankruptcies are still ahead as online giants expand. It is hard to build a new business, but it is harder to reinvent an old one. That doesn’t mean it can’t be done. It is a mistake to write off the old economy. A lot of those companies will pull through and some winners are already starting to emerge. Who knows, they may even start to outperform their tech rivals on the stock market.
‘Cinema admissions are set for the best year since 1971 despite rise of streaming’