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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