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How Dunelm focused on customer experience and grew profitable sales online and in-store

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Dunelm this week said that its focus on customer experience, both in store and online helped it to grow sales and profits over its latest financial year.

The homewares retailer, a Top50 trader in IRUK Top500 research, reported revenue of £1.1bn in the year to June 29, up by 4.8% on the previous year. Pre-tax profits of £125.9m were 35.2% ahead of last time. Online sales grew by 35.1% while store sales were up by 7.7%. In the fourth quarter of the year alone, store sales were up by 12.1% while online was 37% ahead.

Focus on customer experience

Over the past year Dunelm says it has focused sharply on its core Dunelm business, closing the Kiddicare and Worldstores websites – which it bought in 2016 for its commerce platform  – and transferring product lines to its website, while also investing in digital marketing to attract Worldstore shoppers there too. The focused approach, said Dunelm chief executive Nick Wilkinson in his review, “enabled us to invest all of our energy back into the Dunelm brand, concentrating on one supply chain and one website. In so doing, we significantly tightened our operational and commercial grip on the business.”

Multichannel services

Dunelm multichannel sales include revenues from online home delivery, in-store reserve and collect revenue and from sales made in-store via tablets, and accounted for 17.4% of total sales during the year. That’s up from 13.5% a year earlier.

During the last year, Dunelm promoted its online services in-store by increasing its “customer hosts” to 1,200, training them to help shoppers buy from its extended range – 55,000 lines compared to the 30,000 stocked in store – via in-store tablets. 

The retailer is to launch a new digital commercial platform during its current financial year that it says will enable it to “catch up” on convenience, not only offering click and collect but also adding more complex services such as paying for items stocked in store online ahead of collection, or buying a basket of items online with a range of different fulfilment options. Future development will focus on customer-focused improvements that drive conversion, frequency and basket size. “We view digital development as driving store sales as much as our online sales and will continue to invest in developing our offer across all channels,” said Wilkinson. 

New approaches to selling

Dunelm also pointed to how it invested in the in-store customer experience through its product buying strategy, offering “more style and better value” as well as more furniture and more seasonal ranges to customers. Special buys were offered more frequently both in-store and online, but clearance was managed to result in having less discounted products in stock, leading to higher levels of full-price revenue. 

It says it is no part of a portfolio of retailers frequented by shoppers who are now using technology and are influenced by social media in their buying habits. 

Looking ahead

“As we progress with our customer first strategy in a fast-moving digital world, there are new skilswe are acquiring and need to develop further,” said Wilkinson. “in particular we will build on the transformations made in our technology and product teams in FY19 and are developing deeper capabilities in data and insight to provide benefits across the business.”

He added: “Recent trading performance has continued to be strong, reflecting both weak comparatives in the prior year and continued market share growth.  However, we remain cautious about the full year outlook due to increased Brexit uncertainty and specifically the impact it may have on consumer spending as we enter our peak period.

“Looking to the future, I am excited about the opportunity to grow our business as we enhance and extend our specialist and multichannel offer, build on our market leading position and fulfil our purpose of helping everyone create a home they love.”

Analyst comment

Commenting on the figures, Hannah Thomson, senior retail analyst at data and analytics business GlobalData, said: “Dunelm’s stellar performance is partly attributable to soft comparatives reflecting tough market conditions at the start of 2018 but there is no doubt that it is now a much leaner business. Freeing itself from the distraction for the Worldstores businesses enabled it to improve its sourcing and keep a tighter control of markdown costs, which helped lift profit before tax to £125.9m. 

“These results are sure to make its rivals envious; John Lewis has managed just eight weeks of sales growth in its home vision since the start of 2019 while the struggles of fellow department stores Debenhams and House of Fraser over the past year have been well-documented. With a store portfolio mainly located on retail parks, Dunelm has been better protected from the impacts of falling footfall to town centres, and its almost-unique proposition as a homewares specialist means shoppers are likely to find what they’re looking for among its extensive range.”

Thomson said Dunelm would also continue to put its name in front of an audience of about 2m through its sponsorship of ITV’s This Morning, which runs until next March, adding, “it also has room to improve its digital capabilities having taken a cautious approach to launching its replatformed website, which will eventually allow it to offer click and collect.”

Dunelm is marking its 40th anniversary this year. It was founded in 1979 as a market stall business and today trades through 172 stores and online.

Image courtesy of Dunelm

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