By Alex Bishop, Investment Manager, Ufi Ventures
As we move through the early part of 2021, set against the backdrop of a global pandemic and the continued UK lockdown, a number of key sectors within the UK economy, including retail, transport and hospitality, are undergoing drastic levels of transformation. These changes have only been accelerated by the ongoing health crisis, with large swathes of the workforce either on furlough or at risk of their roles becoming obsolete.
Within the Ufi Ventures investment thesis, we point to a necessity to support workers in sectors under transformation, either via new recruitment tools or digital technologies that enable upskilling and reskilling. This has become even more crucial in a post pandemic world, with unprecedented disruption in a number of sectors resulting in large-scale unemployment and a significant change in what roles and skills are required in these industries moving forward.
This quarter, we are targeting innovative ventures building digital solutions designed to support workers in industries currently undergoing sizable transition. Please reach out to me directly if you know of any impact focused start-ups operating in the space.
Upskilling to keep up
It is clear that emerging technologies, such as automation and artificial intelligence (AI), were affecting a number of sectors heavily long before the pandemic emerged in late 2019. McKinsey Global Institute estimated before the pandemic that 14% of the global workforce would have to change career or gain new skills by 2030 because of such growth in automation and AI.
"Workers will need to adapt their skills to avoid their abilities becoming obsolete "
It could be argued that this is now of even greater concern, with a recent PwC report suggesting 35% of companies in the US have accelerated automation and AI usage during the pandemic. The full extent of the effects this will have on workers within heavily impacted sectors, such as retail and transport, remain unclear.
Ultimately, workers will need to adapt their skills to avoid their abilities becoming obsolete in such a working environment.
A digital drive toward e-commerce
The retail sector is currently undergoing a widespread shift towards digitalisation and e-commerce that has been hastened by the pandemic. The impact felt by core workers in the industry has been sizeable, with brick-and-mortar retailers being forced to close, and a significant acceleration in the e-commerce boom. The traditional role of a retail worker is changing, but what is being done to support this transition?
This has only been amplified by recent acquisition activity in the space with ASOS purchasing Topshop, a major part of the Arcadia group, from its administrators for £265m, putting 2,500 high-street jobs at risk. Boohoo have also acquired other Arcadia group brands, such as Burton and Dorothy Perkins, alongside purchasing what was left of the department store chain, Debenhams. The Arcadia group transaction did not include the 214 related physical stores, or the 2,450 workers employed, highlighting how the traditional retail worker is at risk of becoming redundant. So, the question is what happens next for workers in the sector? How do we limit the impact on workforces in these scenarios?
"Growth in e-commerce has led to a wave of new jobs being created"
A recent report focused on food retail, published by the Institute for Social Transformation in the US, offers some encouragement, suggesting that e-commerce has not been the job killer that many in the retail sector feared. Rather, the growth in e-commerce has led to a wave of new jobs being created as a shift in operations occurred. For example, roles in collating items for fulfilment have soared. A question about how such roles will be resourced moving forward is also worth considering here, with clear evidence that workers are increasingly being employed on short term contract to carry out such work.
A Deloitte report, also offers insight that digital technology will result in a sizable shift in skill requirement for the retail workforce rather than the retail worker becoming obsolete. They argue that the increasing focus on experiential retail will require a shift towards better customer service, some delivered through digital means, which will require fundamental technology skills within workers. They also propose that demand for the best talent will become fiercer, suggesting there will be an increased importance on skill creation in the space.
The broad concerns here though are around:
- The overall quantity and quality of these future roles;
- The proportion of high skilled, secure employment to lower skilled and lower quality roles;
- How easily retail workers can transition into these new roles and what tools are available to support them.
It seems clear that there will be a need for more personal and digital skills as we shift towards a more experiential retail environment in store, and a means for workers to access the upskilling required.
Emerging activity to address the issue
When exploring activity targeted at the broader issue, some major organisations have already made sizable commitments to address the problem, with our latest research in partnership with Tyton Partners surfacing Daimler’s announcement of €1 billion investment into a transformation fund with the purpose of addressing the effect the Future of Work is having on its business and workers. Another example is Amazon’s career choice program, designed to support employees upskilling themselves for careers outside of the company.
Interestingly, in response to the pandemic and the impact on workers, we have also seen the creation of Talent Exchange in the US, that is trying to broach the problem by creating a marketplace designed to support workers find roles that are right for them during the ongoing crisis.
Of-course, we know that there is not one simple solution to the issues workers continue to face in sectors under transformation. It seems clear though that it will be crucial for employers operating in such sectors to follow the approach set by Daimler and put clear strategies in place to mitigate the impact on workers.
Employee buy in will also be crucial, with the potential for different labour models to emerge further in such sectors. For example, the growth in delivery and fulfilment work within retail has resulted in a shift towards utilising platform workers on reduced pay with no employment benefits, demonstrating a longer term risk to workers.
"Early-stage innovation will have a critical role to play"
Ultimately, we know that early-stage innovation will have a critical role to play in developing solutions that are tailored to all the different stakeholders involved. At Ufi, we want to know what different digital technologies are being developed by the start-up community to support workers in these disruptive sectors. Please reach out to me directly if you know of anyone innovating in the space.