Next’s digital focus pays off as online sales rise

Online sales surged over the Christmas period following Next’s decision last year to increase its digital marketing spend, with full-price sales continuing to grow.

Capitalizing on its decision to double down on its digital marketing, Next saw full-price sales rise by 20% in the eight weeks to Christmas, £70m ahead of previous forecast.

Online sales increased by 45% over the period in question, with own-brand Next online sales increasing by 31% and third-party brand sales in the UK by 85%. During the period, overseas online sales also increased, up 36%.

By contrast, retail sales in the UK and Ireland fell 5.4% in the eight weeks to December 25.

The group’s forecast for its full-year pre-tax profit has now risen by £22m to £822m, 9.8% above 2019 figures.

Full-price sales are an increasingly important part of Next’s mix, up 21% in the eight weeks to Christmas. Inventory available for the end of season sale was down 18% from two years ago, due to better than expected full price sales.

On the price side, Next expects total average selling prices to increase more than comparable price increases as consumers choose to buy slightly fewer items at moderately higher prices.

Next has seen a “strong revival” of adult formal and formal wear over the Christmas trading period and despite supply chain issues, the retailer says its overall sales success is a testament to the “strength of underlying consumer demand”.

Next continues to increase digital marketing spend as online sales increase

The company considers forecasts for the year ahead to be “exceptionally difficult” and even assuming there are no further Covid disruptions, Next expects uncertainty to persist around the issues of inflation and the level of pent-up consumer demand.

From a marketing investment perspective, Next is poised to continue increasing its marketing spend to levels above pre-pandemic levels, opting to push its digital channels over physical stores.

CEO Lord Simon Wolfson said last April that the retailer saw no point in using marketing spend to drive customers back to physical retail.

“The most important thing you can do to attract people is to open doors,” he said. “Of course there are things you can do to attract people to stores, you can spend a lot of money on that. The real question is whether it’s profitable.

He added that Next had “virtually stopped” marketing spending other than through online channels.

The movement seems to have landed well with consumers. Total online sales for the full year were up 49% from 2019, compared to retail sales in the UK and Ireland, which were down 24% for the year. This mirrors results published by Next in November, which revealed that online sales generated a profit of £4m for the business.

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David A. Albanese