Next reported its first negative year since the recession this morning, marking the end of its tenure as a bullet-proof business.
Following Next’s first profit fall in eight years, Lord Wolfson admitted that the retailer had work to do to once again top the retail pile. However, he set out clear strategies for dealing with its issues.
Retail Week takes a closer look at the problems Wolfson will be rolling up his sleeves to tackle.
Next has implemented significant changes to make its buying cycle quicker and more responsive to trends and this has had huge benefits.
Some of its best-selling products over Christmas would previously not have been in shops until February – this year they hit stores in November.
But in chasing trends, the retailer has taken its eye off the ball when it comes to core “heartland” product, defined as easy to wear, mid-price, best-selling styles that can be sourced quickly and replicated in multiple colours.
Wolfson termed the solution to this problem as “relatively straightforward”.
“We don’t want to throw away the progress we have made in being quicker to respond to new trends just because there have been some bumps along the way”
The trick here will be to find the right balance of trend and core essentials.
As Wolfson said: “We don’t want to throw away the progress we have made in being quicker to respond to new trends just because there have been some bumps along the way.
”We have to be quicker to respond to new trends and make sure our ranges have all that heartland product in.
“Going forward we will continue to build on what we have learnt about the rapid development of new products and the delivery of new trends, with the proviso that those trends must be delivered in a way that all our customers can easily buy into.
”In re-balancing our ranges, we must be careful not to become overly conservative and throw away the excellent progress we have made in moving our buying processes forward.”
Work to fix the issue started in January, so while some progress will be visible in summer, the collections will only be where management wants them from September onwards.
Next was once a market-leader in fulfilment but has witnessed rivals catching up with it, blunting its competitive edge.
“Another major project is the roll-out of premium one-hour delivery slots”
Wolfson laid out a raft of changes to Next’s fulfilment options this morning.
They included the launch of Next Unlimited, which allows shoppers to sign up for unlimited next day delivery for a year across home and clothing for £20.
This is already an option offered by etail leaders such as Amazon and Asos and raises Next’s game.
Another major project is the roll-out of premium one-hour delivery slots.
Customers will have to pay an extra £2 for this but, again, it places Next as a pioneer.
While Directory sales are up 4.2%, Next’s credit business is shrinking, with active customers down 3% this year, although the rate of decline is slowing.
This problem stems from 2014, when it became harder for consumers to sign up for credit.
This is a structural problem that Next cannot influence. Instead, it is focusing its energies on mitigating the consequences.
Last year, Next began to actively market its credit account to new and existing customers, which resulted in “a steady improvement in the rate of attrition in our credit customer base” , but it believes the opportunity for further improvement is limited.
Changes to the directory this year include the rebranding of its credit offer from Directory Account to NextPay to make it more customer-friendly. Next is also redesigning the website and offering more targeted credit packages to potential customers.