Shop Direct posted its fifth consecutive year of growing sales and profits – and boss Alex Baldock is confident the business is on track to make it six.

The retail group delivered what it described as another “record-breaking year” of profit and sales increases.

Its online department store and growth engine Very was the primary driver of sales, alongside its booming m-commerce division and what chief executive Alex Baldock describes as “well above market fashion performance”.

Baldock believes the pureplay retailer’s “big bets” of ditching its catalogue and ploughing investment into AI technology and mobile paid off in its full-year results and will continue to do so in its current financial year.

So how did Shop Direct deliver another healthy balance sheet while maintaining margins, and what’s Baldock plan to ensure it does it again?

Flexing fashion

The online retailer’s clothing and footwear sales increased 6.4% during the financial year, driven by a 21.8% increase in sportswear sales.

“Our model means we make a supplier’s brands affordable to new customers through our credit, which makes us more valuable”

Alex Baldock, Shop Direct

Baldock said that spotting the athleisure trend early and catering to it accordingly with key partnerships such as Nike and Adidas had established Shop Direct as “the UK’s number one online sportswear retailer”.

Baldock also attributed the retail group’s increase in fashion sales to its new partnerships with more upmarket brands such as Jigsaw, Hackett and Victoria Beckham, and the breadth of customers Shop Direct makes them available to.

“There’s a good reason we’re a partner of choice for these businesses and it’s not just about our scale,” Baldock says.

“Our model means we make a supplier’s brands affordable to new customers through our credit, which makes us more valuable.

“We can guarantee that if you supply to us, you reach new customers that you wouldn’t otherwise.”

Agile working

If artificial intelligence is the big bet Shop Direct is making strategically, then creating a workspace fit for millennials is its cultural transformation project.

“If you want to recruit young people in areas like data science, software engineering and other critical areas for a digital retailer, you have to be the sort of employer that they’re looking to work for”

Alex Baldock, Shop Direct

“If you want to recruit young people in areas like data science, software engineering and other critical areas for a digital retailer, you have to be the sort of employer that they’re looking to work for,” Baldock explains.

“They’re not looking to work for a nine-to-five command and control merchant, where you sit in your siloes and repeatedly obey instructions − that is just not a recipe for success now.”

Baldock admits it is early days for Shop Direct to make its working environment fit for the future but it is “working hard” on making its company structure and culture ready for “the agile working revolution which we think is going to be the next big thing”.

Benefiting from Black Friday

Many retailers, particularly in the fashion sector, have toned down their Black Friday efforts in recent years, or avoided the promotional bonanza altogether.

However, Shop Direct is amongst a handful of retailers to have leaned into the US-imported sales frenzy.

“We’ve found Black Friday to be a particularly effective customer acquisition time”

Alex Baldock, Shop Direct

When asked about his ambitions for Black Friday this year, Baldock was clear that he has no intention of slowing down.

“We’re very careful about ensuring it’s a profitable activity for us and not a vanity exercise,” he explains, adding that the retailer’s product mix of gadgets, beauty, toys and branded fashion make it particularly well suited to benefit from the retail event.

But Baldock stresses that while appealing to its existing customers who are hungry for a bargain, Black Friday also helps Shop Direct market itself to new shoppers. 

“We’ve found Black Friday to be a particularly effective customer acquisition time − we brought in 1.4 million new customers last year and Black Friday made a big contribution to that,” Baldock reveals.

“Because of our data and analytics, we understand quite well the lifetime value of those new customers and so we’re able to bring them in profitably.”

Braced for GDPR

For pureplay retailers, particularly those like Shop Direct that have invested heavily in personalisation, new legislation which comes into effect next year could have a significant impact on how they communicate with customers.

“Data is arguably our number one asset which is why we’ve worked so hard on the talent, technology and partner front to make much more use of it”

Alex Baldock, Shop Direct

The hefty fines associated with violating the EU-wide implementation of General Data Protection Regulation (GDPR) and the need for explicit permission from shoppers to use their data could leave many retailers feeling nervous – but Baldock insists the new legislation is not just necessary, but welcome.

“We’re not only complying, we’re leaning into it with enthusiasm,” Baldock insists.

“We’ve been investing a lot of time and money in it, it gets a very high billing on the board agenda and we’re confident with our progress on it.”

GDPR comes into force next May and, while it has been described as stringent by some industry observers, Baldock thinks compliance is a small price to pay for the worth of a personalised online shopping offer.

“Data is arguably our number one asset which is why we’ve worked so hard on the talent, technology and partner front to make much more use of it,” he says.

“We don’t see anything in GDPR that’s unreasonable or not what we’d want to do anyway. Businesses should look after customer data carefully and be able to justify the customer data that they hold and how they’re planning on using it.”

Socially savvy

Online retail may be the go-to channel for speed and convenience for shoppers, but it has a way to go in offering the inspiration of a bricks-and-mortar store.

“We need to be trusted to look after [our shoppers’] data which is why we invest time, data and money into data security”

Alex Baldock, Shop Direct

For Shop Direct, one key way it has bridged this divide is through social media, with Baldock describing Facebook as one of the etailer’s “key partners”.

The business is also using the social platform to identify and target potential customers with the digital equivalent of a shop window display.

“We know what our most valuable customer looks like and we can share that information with Facebook, which they can marry with their data to go and target customers who look like our most valuable shoppers,” says Baldock.

He adds that whilst treading the line between cool and creepy is a “critical challenge” for the business, shoppers are fundamentally open to being advertised to online, provided the product is right.

“We need to be trusted to look after [our shoppers’] data which is why we invest time, data and money into data security – but our experience is the customer laps it up and wants to be provided with relevant stuff,” Baldock concludes.