First published by Retail Week, 24 April, 2014 |
Next posted £695m pre-tax profit to the end of January, bucking the trend of flat or declining growth faced by many retailers.
Retail analysts reading the runes of the high street future were quick to pounce on Next’s recent profits increase.
The figure was particularly notable given that profits had outstripped high street bellwether Marks & Spencer for the first time. But beyond the headlines is an even more pertinent fact: for the first time, Next generated more profits from online and catalogues than from its stores.
Specifically, its retail profits grew 5% to £348m, but Directory profits rose 19% to £358m.
A long-time exponent of catalogue selling alongside its physical retail portfolio, Next is now in a perfect position to benefit from consumers’ demand for an omnichannel retail experience.
We all know technology is changing shopping behaviour at a faster pace than ever before. You’re never alone with a smartphone and this modern-day shopping partner is informing our decisions on how, where and when we shop. The result? Retail is now in the age where selling has to be everywhere, instant and personal.
In South Korea where Cheil is headquartered, the change in shopping habits offers a salutary view of where the UK high street could be heading.
In 2011, according to a Korean Chamber of Commerce and Industry survey, only 11.9% of Koreans shopped using their smartphones. By 2013 the figure was 62.6%.
Smart players like Next realise we don’t shop like we used to. They’re starting to understand that real people – you and I – are constrained by not one, but three budgets when we shop.
Of course there’s the financial one but there’s also the time budget. And increasingly, most of us have a frustration budget – if it’s not easy and straightforward, we’ll move on.
These elements add another layer of complexity to what is no longer a linear path to purchase. Today, shopping is an intertwining journey of searching, shopping and sharing – fuelled by mobile.
To cut through the complexity, we must deliver simplicity in our retail experience. If we don’t, we exceed the shopper frustration budget.
Technology is simplifying shopping, with a corresponding shift in the price/quality value equation. Whereas once it was limited to price x quality, now it is (price x quality) ÷ convenience. And technology is constantly resetting our expectations of convenience.
Every time we experience something new that makes our shopping experience more convenient or personal, it resets our expectations of what other retailers should be doing for us.
The customer is still king and is a more demanding ruler than ever before.
Layering search, shop and share with the new budgets – financial, time and frustration – to deliver change is what could make part of an agile future-facing retail landscape.