For those in the retail, trade, and hospitality sectors, one thing is certain in 2025: the year of the snake will have a sharp bite. Rising costs, falling confidence, and stagnant demand are challenging enough, but the end of this quarter will also see the impacts of rising employer National Insurance Contributions and increases to the National Living Wage hit – a significant blow to labour-hungry sectors that rely on their people to deliver and differentiate their customer offer.

“Whether small or supersized, most businesses have now calculated the eye-watering impact these additional costs are going to have on their P&L and, in this subdued market,

are facing into an uncomfortable truth – the year ahead is likely to be one of tough choices,” says Andy Newman from mdj2, the consultancy that specialises in solving critical challenges in the retail, trade, and hospitality industries.

Drastic measures: Respond don’t react

In response, many industry leaders are reportedly planning drastic measures; the media is full of headlines about companies drawing up plans to slash staff, squeeze suppliers, push prices, cut capex, and axe activities. There’s certainly no shortage of reports suggesting extensive cost-cutting strategies across the board.

It’s hardly a surprise that 70% of the Chief Financial Officers recently interviewed by the British Retail Consortium report to feeling pessimistic about the year ahead.

Yet cutting costs isn’t the sole answer.

“The trouble with this approach is it’s a death spiral,” says mdj2’s John Alexander. “As soon as you lose staff, you lose momentum. Those colleagues you cut tend not to be idle, so when you take them out, your business does less – it’s less productive, less innovative.”

Echoing this sentiment, mdj2’s founder, Neil Munz-Jones warns, “Cost cutting alone isn’t going to solve this. While cutting colleagues and capex may help meet short term cash flow targets, it won’t sustain sales growth. When you indiscriminately slash, you end up cutting the wrong things.”

Beyond cost cutting: The path to sustained growth

So, what’s the answer? Neil believes that this year’s winners will be those who effectively juggle cost reductions with strategic investments to grow their way out. This balancing act will require investing in the now to achieve sales growth targets, while also engaging in longer-term projects for future success.

“Despite the tough environment, someone out there will be making these investments. The pace of change is relentlessly accelerating, raising the bar each year. You can tread water for a while, but eventually, you will run out of energy and sink if you don’t move forward,” says Neil.

The critical question then is where to cut and where to invest to manage this year’s looming shortfall.

Clarity: Focus on proposition and productivity

“If I had to simplify it, I’d say focus on two things,” says mdj2 Director, Steve Goodburn, “Proposition and Productivity – in that order”.

“Being crystal clear on your proposition is the place to start,” continues Steve, emphasising the importance of ensuring everyone in the organisation has clarity on who you want to appeal to and how you distinguish yourself from the competition.

“Once everyone is clear on the proposition, it’s far easier to make strategic decisions about what to cut and where to invest,” adds Steve. In an environment where many are heavily focused on cost reduction, Steve notes that those who come out on top don’t do so at the expense of productivity.

From doom to bloom: Strategies that work

“When you look across the retail landscape, you’ve got winners and losers. The losers get caught in a doom loop; the winners reinvent themselves to continue to bloom. It’s a trend I see accelerating,” says Steve.

This is where the twin strategies of proposition and productivity come into play. “Firstly, it’s having absolute clarity on your core customer and proposition, then effectively designing your organisation to deliver it in the most efficient way.”

Ready to outsmart the Year of the Snake and sidestep its sharp bite? If refining your proposition, enhancing productivity, or balancing efficiency with effectiveness is on your agenda, we’re here to help. Connect with us today, we promise, we don’t bite!

info@mdj2.co.uk / +44 (0)1329 833 291 / www.mdj2.co.uk

At mdj2, we solve critical challenges in the retail, trade, and hospitality sectors to drive change, efficiency, and growth. Leaders in these sectors partner with us to harness their opportunities and overcome their greatest pain points — everything from proposition and process to productivity and people. This year we’re celebrating 20 years of delivering real and measurable outcomes because to us, yours is always more than just another project.