Making new acquisition Made.com a success will not be without its challenges for Next, but it starts from a strong financial and strategic position

Made.com book shelves

Made’s mass of existing stock is reported to be on the way to TK Maxx

Next has rescued Made.com. For the sum of £3.4m, the retail giant has walked away with the homeware etailer’s brand, domain name and IP, leaving behind any stock, property and staff.

Made was priced at £775m when it floated last year, so it seems like good value for those key parts, but what should Next do with its purchase? And what will it have to overcome to make sure Made is a success under its ownership?

Fill the department store gap

Next is no stranger to furniture – although how much money it makes as part of its £4.8bn revenue mix is unclear because it does not publicly split it out fully. But it has become an increasingly important investment area.

It has a healthy spread of Next Home stores across the UK and even operates a bespoke home design service, assisting customers with everything from sofa consultation appointments to made-to-measure curtains. 

Next has been steadily bolstering its branded home offer, which brought in £91m last year, with a suite of names including Laura Ashley, Orla Kiely, Silentnight and Queer Eye on its site. Earlier this year, Next invested a similar figure to what it just paid for Made for a 25% stake in the very similar style of brand Swoon. 

“Next is forging ahead with the homeware side of the business and increasingly, it only really wants to take on clients it can take an equity stake in,” says Retail Week Prospect senior retail analyst Kate Doherty. 

“It’s an area of the market that it hasn’t saturated in the same way as fashion. It is competing with the likes of H&M and Zara, which are pushing more into that side of the business with their homeware offers. Some retailers are leaning into their speciality and other retailers are diversifying. Obviously, Next is already offering homeware, but Made.com broadens its proposition.”

Although Next told Retail Week it was “too early” to provide details about its plans for Made, observers believe the assets it selected provide some clues.

Doherty says: “Next is increasingly looking to fill the gap left by department stores. I can see it offering almost a concession-style Made area in its stores and bringing everything under one roof.”

“I don’t think the price really represents the amount of investment that Next will have to make”

Eleonora Dani, Shore Capital

Outside of its stores, what it does online will be more interesting to watch, she says. “We’ll see Made products on the Next website but it would be a risk to dilute the Made brand with Next products on the Made site, even if it makes business sense to push the Next products alongside.”

The Made.com domain is a powerhouse. Since it was bought by the founders for $80,000 in 2010, it is fourth in the ranking of furniture retailer websites in the UK, behind only Ikea, Wayfair and DFS, according to SimilarWeb.

The site brings in an average of 6 million visits a month – around three times the visitors to Habitat and five times that of Furniture Village. What is not guaranteed for Next is access to all of those users’ data, according to Freeths commercial consultant Mark Lumley.

Lumley says: “It’s quite difficult to acquire Made’s list of customers or the right to engage with them without having the right sort of permissions or consents under GDPR in the UK’s data legislation.” 

Shore Capital analyst Eleonora Dani says there are further hurdles to overcome, principally the business model change that is said to have led to its downfall

“I don’t think the price really represents the amount of investment that Next will have to make,” says Dani

“Its other acquisitions like Victoria’s Secret have been more like a joint venture. Typically, it likes to invest in brands where the owners still have skin in the game to make sure they perform well. I think made-to-order will have to stay if it wants to be profitable. It’s expected in the industry – DFS does it – I think everybody is willing to wait to get that personalised level of service.”

Identity crisis?

Made’s mass of existing stock, which played a major part in crushing the business, is reported to be en route to TK Maxx, although the retailer was unable to confirm or deny this. 

What is not in doubt is that Made’s ‘mid-century millennial’ product designs are a major part of its identity and with Next not expected to take on any Made staff, leaving over 300 people facing redundancy, it may be at risk of losing the very thing that made it a success. 

“While I’d like to think that the style and design will stay, without the people that made it, is this possible?” says Dani. 

“It’s all about the brand awareness in the short term, but the question is whether that can continue in the long term; can they replicate the creativity elements without the designers?”

“Next has got such a strong financial position that it can afford to make strategic decisions when other retailers are looking to make cuts”

Kate Doherty, Retail Week Prospect

There is also the matter of thousands of Made customers who placed orders in the run-up to its collapse who have now lost their money or will have to contact their credit card companies for refunds.

However, Doherty says because Next has such a powerful position in the market, the deal will be a success and it will take more than some dissatisfied customers to call that into question.

She says: “Next is choosing to strengthen its proposition during the cost-of-living crisis. It is always looking ahead to what the next trends will be and which areas will be profitable when people start being able to spend again.

“People will eventually again be looking to enhance their homes with big-ticket items. Next has got such a strong financial position that it can afford to make those sorts of strategic decisions when other retailers are looking to make cuts.

“But Next is a retailer that’s not looking to just survive. It’s a high street name that people know very well and trust, and at the moment, when there’s so much change and upheaval, it’s a brand that people will keep returning to and Made will benefit from that.”

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