A tale of two retailers: making digital profitable
For the majority of us who are returning to work after the Christmas break, apart from the cold weather, diets and “dry January”, one of the first things that we usually read about is the retail results from the festive period. These look like being a very mixed bag this year and is usually a combination of factors which lead to either success or failure.
Six tips for improving digital performance
Two early announcements have seen very different outcomes, with Next announcing remarkably good results and Debenhams disappointing the markets at the same time. At this point I will say that neither of the two organisations are clients, so my observations are genuinely my own unbiased opinions and are purely based on statements and facts gleaned from publicly available material.
Both companies are stalwarts of our UK retail sectors and play an important role in our high street and online. Both have seen huge change, but most observers seem to think that Next have got their strategy broadly correct. To be fair to Debenhams, their offering is a lot broader and they also have to cater to a wider demographic, but I think that there is a clear differentiator between the two, which is their digital strategy and execution. If you look at both the the websites and their respective Apps, it starts to become clearer as to why there is a difference in the two companies.
To start with, when you go to the Next site, it offers the Next App, whilst I couldn’t even find one for Debenhams and the Debenhams website looks quite tired compared to the Next portal. Unsurprisingly, both organisations footfall was down on last year which is probably a combination of cold weather, Brexit and the general change on the high street. However, what is quite remarkable is the improvement in the online numbers for Next. When you look at the whole digital experience, you can start to see the reasons for the difference. I am not suggesting that this is the only reason for Next’s success or for Debenhams’ woes, but I am sure that the digital experience has played a big part in the overall performance of Next.
So the key observation I am making here is that it appears that one of the main reasons for Next’s success in the challenging climate is that they have embraced the whole concept of digital performance much more comprehensively than Debenhams at the current time. To have no digital App in the current climate when most retailers are struggling to retain market share is rather surprising.
In our experience, the key to digital performance is providing an immersive experience which allows the user to access products and services across a wide variety of channels in a seamless environment. This means following a number of steps as you go through the digital transformation journey. These include the following:
1: Digital strategy- this is ensuring that the board of the company/organisation is bought into the new vision and there is a digital champion who can articulate the whole journey
2: Ensure that there is a clear Return on Investment (ROI) and that there is an agreed “end-state” which the whole team has agreed
3: Use Cloud and other new technologies to gain competitive advantage. Use small agile companies to help achieve “quick wins” from a technology adoption perspective.
4: Ensure that your infrastructure is up-to-date and scalable. The best digital transformation initiatives fail due to poor infrastructure investment decisions
5: Measure your progress religiously to ensure that you are on track to deliver the desired objectives. Try to remove silos of data by using Business intelligence to measure yourself and your team on a regular basis
6: Be obsessive about the end customer experience and continually monitor the performance of your infrastructure and the way that the users operate across multiple access points, website, mobile, LAN,WAN etc.
Next and Debenhams contrasting fortunes demonstrate clearly what a good digital strategy can achieve. Whilst store sales for Next declined by 6.1%, online rose by 13.6%. In contrast, whilst digital sales rose by 9% for Debenhams, the overall performance was much poorer than Next. This directly contributed to a downgrade in profit projections for Debenhams and an uptick for Next. Unsurprisingly, Debenhams share price crashed by 18% in early trading, whilst Next’s share price increased by 7%.
The message seems to be clear enough that if you want to improve profitability and share price in a challenging market, you must fully embrace digital channels and know how to optimise digital performance. The six key steps I have outlined above will go some way to ensuring that your digital performance will go up rather than down and will not only result in better customer experience but will contribute straight to the bottom line.
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