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As fashion retailers struggle with emerging inflation and market volatility, Drapers asks the industry what lessons can be learned from Next’s success.
Against a backdrop of emerging inflation, cost-of-living crises and high temperatures, recent monetary reports from fashion stores are mixed.
This month, Very Group reported an 8. 2% drop in its fashion and sportswear sales over the 52 weeks to July 1, 2023. This week, Sainsbury’s Tu Clothing reported an 8. 4% drop in clothing sales over the 28 weeks to September 16. Etaler Asos is trimming its losses as its full-year effects released this week showed a 10% drop in group profit and a 238. 7% rise in operating loss to £248. 5 million, and it is rumoured to be dumping Topshop imminently to cut costs.
However, retail giant Next turns out to be bucking the sector’s downward trend. Full-price sales for the 3 months to October 28 were up 4%, prompting the store to raise its full-year pre-tax profit forecast to £10. million to £885 million.
A buying frenzy ensued. In October, the organization added British store FatFace to its ever-expanding portfolio, buying the company for £115. 2 million. In September, it also increased its stake in Reiss to 72%. Other notable purchases include Cath Kidston’s intellectual property in March for £8. 5 million, 74% of Joules in December 2022 for £34 million, Made. com’s intellectual property in November 2022 for £3. 4 million, and Jojo Mom Baby for £16. 3 million in April 2022.
Read more: Next’s Total Platform: “Genius on Many Levels”
Industry experts explain to Drapers the key classes stores can get from Next and whether it’s imaginable to bottle the fashion retail flash that drives the company forward.
While it offers consumers a wide diversity of brands and styles, giving them case-by-case features at other value points, Next’s strength lies in its future-proofing, according to Aoife Byrne, senior fashion and retail analyst at market insights platform Edited. .
“Next has been a staple of the market for many years,” Byrne said, noting that despite its creation in 1864, Next manages to stay relevant.
Having recently acquired FatFace, the store also increased its stake in Reiss to 72% in September this year as part of a strategic partnership. This meant that Next’s consumers would have a wider diversity of clothing at other price points, and independent representative Maureen Hilton noted that its product offering means it resonates most with a specific type of audience.
“Their visitor base is families, so their goal is products that are mandatory for visitors at this level of living,” Hilton said.
He adds, however, that it would be remiss to say that Next only addresses a family clientele, because it will have to constantly innovate its own ranges, motivate its consumers but also take into account its budget constraints:
“It’s too conservative to say that they cater to a specific market, because they want to think about how they can innovate from their own ranges. They can’t play it safe, so they’re looking to motivate their consumers, but also to see what their budget constraints are. “
And when it comes to playing it safe, Hilton said it’s not to blame for “a few years ago,” but that it’s now more susceptible to taking “controlled risks” with its acquisitions.
He said Simon Wolfson, Next’s chief executive, who has been at the helm of Next since 2001, “has made it his mission to take [open] risks by buying other brands, because all brands have their own appeal to their visitor base. and to diversify the range of its offer. “
Read more: Next’s Simon Wolfson on procurement: “Budget is an opportunity”
In fact, this is highlighted in Next’s most recent full annual business effects for the 12 months ended January 31, 2023, implying that its product groups continued to “overcome the barriers of their offerings in terms of design content, pricing architecture, and product categories. “
At the same time, Byrne noted that the upcoming diversity of women’s, men’s, children’s and household clothing is also appealing to consumers in times of economic downturn, as it has become a “one-stop-shop” for women buying groceries themselves. , their families, and their homes: “[It’s] helping to increase spending on shopping carts and reduce delivery costs for the visitor due to the delivery crisis. “life.
The retailer, which was one of the pioneers of direct mail as a catalog business, has implemented that instinct for innovation well in the virtual space, another retail expert told Drapers.
It then broke into the sales world in 1999, and then introduced its Total platform in 2020, used across the brands it owns and others, any of which are “phenomenal” according to Jonathan De Mello, founder and CEO of Retail and Genuine. JDM Retail real estate consulting.
“It’s a very strong online transactional page and one of the first successful examples of online business that we’ve had in [a store that] is a traditional online [store]. They get the curtains physically and online and seamlessly combine the channels to gain advantages for the consumer,” he said.
It all comes down to Next’s investment in its virtual platform, explained Mathew Dixon, a partner at leadership and executive search consulting firm DHR Global, who said the store did it “intensively and smartly” before the pandemic and leveraged online sales while the rest of the industry deserves it. The market is “struggling” to stay on its feet.
“Their online UX [user experience] is very good and logistically they are excellent; Deliveries are fast, on-time, and reliable, while returns are undeniable, whether by mail or in-store, it’s a smooth and painless experience. They have one of the highest percentages of online consumers over the age of 60, which shows how undeniable the use of their online offering is,” Dixon said.
Hilton praised Wolfson and his team for having “intelligent control” of what’s happening across the company and for running Next in a way that means it’s evolving, either externally or internally.
“They [Next’s directors] have developed a strong culture within the company that gives other people the authority to act and innovate with mandatory support, so it’s not a top-down approach,” Hilton said.
Wolfson has spoken at length in the past about his taste for leadership: “Colleagues don’t want permission to make decisions, making practical decisions is a requirement of their job. “
De Mello also praised Nexts’ leadership under Wolfson for its consistency and stability. “They’ve had the same control design for two decades, with Wolfson at the helm and he’s very smart at managing expectations,” De Mello said. they exceed the expected effects because they change people’s expectations. “
Dixon also applauded the control team, which has made Next an “incredibly stable” company. “Long-term, sustainable expansion means the control team has grown largely from within and remains steady,” Dixon said.
“It is rare to see leaders leave and this stability is reflected in the consistency of the way they operate. However, unlike other stores with highly experienced teams, the drive to innovate has remained at the forefront of what they offer.
After acquiring FatFace in October and Cath Kidson in March, Wolfson said in September that the store would not be a “bubble company” because it had transparent investment criteria and preserved the independence of the brands it acquired. For example, depending on the terms of your acquisition. , FatFace will retain its autonomy of control and artistic independence and will continue to be founded in Havant, Hampshire.
Next has a strong logo acquisition strategy, seeking to capitalize on the dubious retail climate while being “curious” to introduce new offerings and expand its platform, explained Tamara Sender Ceron, associate director of fashion retail at research firm Mintel.
“He’s very selective about the corporations he chooses, and for example, FatFace is more of a successful logo than a suffering corporation,” Ceron said. “Obviously, the corporation has been suffering financially. . . but it complements Next’s offering. “
Ceron said that the acquisition of FatFace and the expansion of its stake in Reiss [September 2023] is a “smart move” that looks more like a partnership, as for any and all acquisitions made through Next, it will gain advantages for both parties “rather than attacking a defective brand. ” and dismantle it. “
He added, “In the current climate, we’ve noticed that Next and many other corporations are expanding their pricing architecture to include premium pricing and brands. It’s a smart move.
Commenting on this, Dixon said: “They are also capable of reviving a faltering company like Made or Joules or taking companies like Reiss or FatFace to new levels. They instinctively know which brands will raise the price to their portfolio and are also regarded as a bidder liked by the way they work and behave.
Even as the industry praises Next, experts also say that challenging situations are on the horizon as reduced holiday sales and the ongoing cost-of-living crisis may hurt its bottom line. But sometimes, the industry tells Drapers that Next is in the lead. British fashion is at the cutting edge, and that there are many lessons to be learned from its success.
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