DFS this week reported record half-year results, which it puts down to a successful growth strategy. We took a look at the retailer is approaching multichannel development. Here are the key themes that we detected.
Fast online growth
Sofa retailer DFS showed that double-digit online growth was contributing to headline record results, in which revenue of £379.9m in the 26 weeks to January 28 was 6.8% ahead of the same time last year, and pre-tax profits of £16.7m were 3.1% up. DFS chief executive Ian Filby said that “good sales growth and strong cash generation” reflected “the successful implementation of our proven growth strategy.”
He added: “The scale of our business, which is larger than our next four UK competitors combined, gives us significant advantages that allow us consistently to offer outstanding value to our customers. We are confident that our size, combined with the flexibility of our cost base and vertically integrated business model means that DFS is particularly well positioned to respond to economic headwinds and cost pressures while continuing to grow our share of the UK retail furniture market.”
DFS says that about 80% of its customers now start their research online, and that its website attracts more than 40% of all UK upholstery web traffic. In the current year, it has seen “significant increases in website visitor numbers, and the number of transactions completed online has grown by a double digit percentage.
It says the increasing proportion of transactions made on mobile devices underlines the importance of investment to enable customers to view its range through whichever device is most convenient, whether that’s a desktop computer, a tablet, a smartphone or in-store Swoosh screens. These screens enable customers to see a range of sofas, projected on a video wall in stores in different colours and materials in order to visualise the finished item. It also enables the retailer to offer the full range from all its stores.
Customers are also going online to track their order and finalise payments, and DFS says it has invested to make this experience easier for shoppers in a way that has cut customer service costs.
DFS has continued to rethink how stores function in a world where digital commerce is increasingly important. It is extending its trial of smaller stores and says its third small scale – 5,200 sq ft – store, in Crawley, is now trading profitably. During the last year it also opened two mid-size stores of between 10,000 and 15,000 sq ft and plans to open another in early April. It plans to carry on opening new stores in the next two years.
It has also continued to develop co-located brand stores: 17 such DFS stores opened during the year, with 15 featuring Dwell, and two featuring Sofa Workshop.
DFS now has 14 customer distribution centres – twice as many as were operational at the same time last year. Five more are set to open over the next six months, taking it to a total of 19. The move releases store space that was previously used for warehousing for retail space: this will be used both for colocated Dwell and Sofa Workshop stores, and to offer extra ranges of beds and dining furniture elsewhere in the DFS estate.
DFS has opened two new stores in The Netherlands, giving it five stores in the country. “This,” said Filby, in his review, “brings us closer to a scale where we can begin to test national marketing, based on our proven model in the UK.” It has also opened a second store in Spain, near Malaga, where it is close to the British expat community. “Notwithstanding the uncertainities surrounding Brexit for UK citizens resident overseas,” said Filby, “we expect DFS Spain to make a positive contribution to operating profit.”