Following Mothercare’s plans to become a digitally-led business, will the retailer be able to understand its customers digital demands?
This week, it was announced that Mothercare is looking to raise around £100 million by launching a rights issue as part of a plan to make the retailer a digitally-led business. What’s more, Mothercare’s chief executive, Mark Newton-Jones, has backed the plans by announcing that he intends to invest £400,000 of his own money – insisting that the retailer has a future in the UK.
Newton-Jones commented on his own investment stating “It is important that while we are asking shareholders to invest in the future of Mothercare, we are doing it ourselves. It is a great business turnaround.”
However, many feel that the rights issue, which will help fund the closure of loss-making stores as well as debt repayments, is just the latest attempt to revive the struggling retailer. The company reportedly plans to use these funds to invest in a more modern store estate, improve IT systems and develop a more efficient operational infrastructure.
Although Mothercare’s overseas business is profitable, stiff competition from UK supermarket chains such as Tesco and internet giants such as Amazon seems to have left the retailer struggling with too many stores and not enough customers. What’s more, critics claim that the retailer’s online model has fallen somewhat flat, and that its product ranges and brands have not kept pace with the wider industry. In fact, even though the group’s UK business has generated around 60 percent of its revenue, it has lost the firm £68 million in three years.
In an effort to tackle these issues and turn the retailer around, Newton-Jones has said Mothercare would become a “digital first” retailer, with iPads and interactive screens in stores so that shoppers can view demonstration videos, customer reviews and access a broader product range directly from the high street.
But will this strategy prove successful for Mothercare? On the one hand, UK store sales have already started to improve under Newton-Jones’ leadership. Like-for-like revenues were up nearly 1 per cent in the 15 weeks to 12 July. However, while a store and product revamp are certainly needed, these changes alone are unlikely to be enough to secure Mothercare’s future. Ultimately, the future of Mothercare will depend on whether it is able to understand – and respond to – its customers’ changing demands.