Customers are in the driving seat.
I spent way too much time at the Sydney Cricket Ground (SCG) in January watching the Aussies do what they do best – beat teams not from South Africa or England.
In one of those random chats with a fellow group of spectators, I ended up discussing the pub industry for several hours. That is an industry that has had to constantly re-invent itself to reflect changes in society. In that way, I saw many parallels between the pub industry and the computer industry (plus the fact both industries have had a focus on late night activities).
To stay relevant, we need to constantly re-invent our businesses and processes to reflect changes in technology and what society expects.I have never professed to be an expert on the pub industry but after a few days at the cricket I now have a much greater understanding of what makes it tick.
What is not as clear is what the future looks like.In the early ’60s, average consumption per capita in Australia was just below 10 litres per year. That rose quite sharply to a peak in the mid to late ’70s to 13.1 litres of pure alcohol.
This was at a time that pubs still closed at midnight and it was a good time to be a publican. Food was pretty basic and entertainment was minimal.
That is a far cry from the current pub scene. Alcohol consumption declined through to the early ’90s where it plateaued for many years and over the past three years has declined to around 10 litres a year. Pubs now seem to simply be a roof over as many poker machines as can fit inside a premises.
We currently have 200,057 poker machines in Australia which represents almost 3 per cent of the total worldwide gaming machines. Not bad for a country that represents only 0.3 per cent of the total worldwide population.
In the changing pub demographics, we now only rank 44th in the world for pure alcohol consumption per capita behind countries such as Moldova, Hungary and Russia but in total gaming machines we are outright 7th in the world behind countries such as Japan and the US.
Our states collect almost $3 billion in revenue from poker machines in pubs and clubs each year (6 per cent of all state tax revenue). A publican now does everything possible to keep patrons in the pub sitting at a gaming machine – with good reason. More than $60,000 revenue per machine is generated each year by the average pub.
I see some major changes coming in the pub industry. Alcoholic consumption per capita will continue to decline. More people will choose to stay at home and pay cheaper prices rather than go out to a pub and pay bar prices.
The federal government poker machine laws will reduce profitability of gaming for pubs (with additional capital costs) as pre-commitment technology must be installed on all existing machines. Wine will continue to replace beer as the beverage of choice for patrons. Our obese society is focusing, more than ever, on healthy eating choices.
In short, I see that the entire pub industry needs to completely re-invent itself over the next five years. Pubs will once again be a meeting place and I see people meeting at the pub for, wait for it, a cappuccino!
With PC sales falling by 6.4 per cent in the last quarter in 2012, our industry needs to look to the future to see what societal behaviours are going to drive our businesses. The very old days of opening a shop, filling it with PCs, adding 30 per cent margins and counting our money are long, long gone.
The consumers of today have grown up with technology and are much more adept at using the capabilities on offer. It is getting closer to the point where technology is like a car – you get in and turn the key and stuff just happens.
In the early days of cars you had to be a mechanic to drive a car and it was similar not so many years ago in the PC industry. To gain the most value from your technology you needed to be a computer expert but that’s no longer the case.
In short, constantly look at what you are doing in your business and keep on re-inventing yourself. You can be sure that what was wildly successful yesterday may not be of any relevance tomorrow.
Let me know what you think will be the biggest change in our industry in the coming years at md@smallbusinessrules.com.