Business gloomy on outlook for the year ahead

Businesses are more pessimistic about the domestic trading outlook than ever. Photo / Getty Images

Pessimism among New Zealand firms has increased significantly, according to a new report, and is expected to be worse now following the coronavirus outbreak.

Businesses expect the 2020 year to be ho-hum, with pessimism about the year ahead up 9 per cent from 1 per cent over the past two years.

The latest Mood of the Sales Leader report conducted by sales and leadership consultancy Indicator, which surveys 130 sales leaders throughout a range of industries at the end of each year, found that just 77 per cent of companies are planning for growth in 2020, down from 81 per cent recorded in 2019.

The 2019 year was harder than 2018 for most companies the survey revealed, with just 60 per cent of firms reporting growth, down from a recorded 65 per cent a year earlier.

About 14 per cent of companies reported a decline in sales in the 2019 year compared to 12 per cent recorded a year earlier.

Sixty per cent of firms surveyed achieved growth in 2019 compared to 82 per cent which had expected growth in the year. In 2018, 65 per cent of companies achieved growth compared to 88 per cent that had expected it.

Expectation versus execution among firms has been on the decline since 2017, the report outlined.

When the survey was first conducted at the end of 2017, the economy and outlook was bullish, however, there had been a gradual decline across measures since then, Mike Stokes, chief executive of Indicator, told the Herald.

Increased competition - noted as the biggest challenge - was found to have disrupted businesses across all sectors, followed by clients with reduced budgets, Stokes said.

Businesses also reported "government", "the economy", "margin erosion" and "tech innovation by competitors" as the biggest risk to their organisation's sales success.

"Everyone is finding it somewhat harder," said Stokes.

"In the last couple of years there has typically been a slide across everything. Competition and disruption is happening more and more for companies."

Stokes believes the downbeat sentiment felt throughout the business community would be more pessimistic today, following the outbreak of the deadly Coronavirus.

"We operate a sales leadership forum and we have about 70 sales leaders who we see every month, we've just seen them this week, and significant numbers of those members were talking about how Coronavirus is having an impact on their business," Stokes said.

The members spoke about Coronavirus affecting capacity restraints, operational logistics and getting product here as having a big impact on sales, he said.

"Sales leaders are typically an optimistic bunch, but I would say that they are cautiously awaiting outcomes. Everybody seems to be in wait and see mode."

Mike Stokes, chief executive of Indicator. Photo / Supplied

While pessimism was at an all time high, Stokes said it was not "off the cliff". However, he said, the 23 per cent of companies that were not planning for growth in 2020 was a big number.

"What we're seeing is, particularly through competition and technology changes, that if [businesses continue] to do the same things [they] will be lucky to see the same results. For companies that aren't adapting or changing the way they sell, market or provide customer service then they will struggle."

No single industry stood out as more pessimistic that another in the survey, though, he said tourism operators were notably the most optimistic.

Stokes said he expected this to no longer be the case following Coronavirus, which had brought about mass booking cancellations to accommodation and tourism operators, and the temporary ban on travellers from mainland China.

The missed growth targets by firms over the past few years showed businesses were not adapting fast enough to competition and technological advances, he said, and as a result of tougher business conditions domestically, the survey showed more firms were looking to export to make up a larger portion of business.

"Exporting is on the rise ... because the New Zealand market has become more and more competitive, companies are looking more overseas to gain growth from there. Of those [surveyed] companies that were currently exporting, three quarters of them were looking to open new markets. Whilst the competitive element is making New Zealand harder, the overseas market, is becoming more attractive."

Stokes could not comment on whether the spike in pessimism among business leaders was the result of the Labour-led government taking over office or the subsequent changes to minimum wage and various employment regulation that had been implemented, but he said the 2017 survey showed sales leader were optimistic about a new government and growth prospects, but this had now dwindled.

Staff retention and securing staff remained a challenge for firms, the survey found.

"[Overall], this year sales leaders are more cautious. If you were to survey the average business leader you might get a somewhat higher level of pessimism."