Thursday, 30 August 2012

Next day delivery

A UK fashion retailer profits online by remaining in-store

Even Next themselves sound surprised by their continued strong performance. In the firm’s latest annual report they outline a nightmarish environment starring an anemic consumer and featuring spiralling manufacturing costs before concluding that actually Next performed “remarkably” well.

The firm has been surpassing expectations year after year. How the company has managed to consistently generate profit while operating in a fragmented and saturated industry is of interest to floundering fashion retailers globally.
Just returning something I bought online

The reason seems to lie on the web. While retail sales in bricks and mortar stores were down -1.4% from 2011, Next Directory, the online catalogue, grew by over 16%. This easily offset retail losses; online sales now generate a third of group revenue.

Typically, fast fashion retailers have struggled to convince consumers to come online (Fashionistas often want to try before they buy). Next profits have primarily come from convincing consumers to part with cash over the internet hence squaring the circle many rivals had been struggling with.

Of Mortar and Modems

The company’s approach to online fashion is promising for tangible retailers, but less so for their online counterparts. Next operates a system whereby anything purchased online can be returned in store; around 60% of online refunds are now done through Next stores.

This may look like poor cost control to the more hardnosed retailers, but it is vital for putting would be customers at ease. Picky and busy thirty-somethings can merely go down to one of Next’s 500 retail stores and return those shoes should they not look just right.

Next has also shown notable ability in catering to a customer base which demands instant gratification. Anything ordered before 9pm will be delivered first thing the next day. Rivals are envious of such logistical prowess.

Yet consumers are demanding nothing less. Next continues to profit from a mix of store ubiquity, customer trust and almost instant delivery. That will be hard to replicate anywhere.  

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