Next’s slowdown in Directory growth was going to happen at some point.
The double digit advances the market has become accustomed to has not just mirrored the growth of shoppers taking to the web in general, it has been driven by Next constantly improving its delivery and service which is one of the best in retail.
The retailer has led the field in multichannel for some time and has a mature online business. Last year’s phenomenal Directory growth was propelled by it extending its next day delivery cut offs from 7pm to 9pm. The move was significant as it importantly captured Next’s target customer – mothers who have got the kids off to sleep and workers who have returned home from the office.
The sales uplift which followed the introduction of next day delivery has now annualised and although the retailer has further extended its next day cut off to 10pm, it will not be as significant.
Of course the slowdown in Directory growth is disappointing after six consecutive quarters of strong growth, but it was inevitable. Next has been such an innovator in the field of fulfilment that there are no easy wins to gain from improvements.
Espirito Santo analyst Caroline Gulliver says she can’t see any another step-change from its Directory business on the horizon.
However, Next boss Lord Wolfson is constantly striving to push the boundaries of what seems possible online and is plotting a same day delivery launch.
Gulliver believes for Directory to grow at the same pace its international online sales need to become more meaningful. The retailer is already chasing growth in this area, however in its 2012 financial year sales via this channel accounted for just £33m so it seems unlikely they are to make an impact to its £1bn Directory business in the short term.
The slowdown is predicted to stay with Gulliver forecasting that Directory sales will grow 5% next year. It is hard to maintain growth rates when you are constantly first with innovation