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Case study: Next

From the article Picking Your Market.

Next , which delivers online orders to 60 countries outside of the UK, is maintaining a net profit on international sales of around 20% of sales. The company recently revised its estimates for international online sales for the financial year to January 2014 upwards from £75m to £90m. Much of this improvement has been driven by a reduction in operating costs which the company has passed on to customers in the form of lower prices. “In the territories where we have reduced prices we have increased both sales and profits,” says the company.

Reporting its first-half results, it said that Directory sales contributed 8.3% to the total growth over the same period in 2012 with the international online business contributing 2.9% of that figure. Its International Business also saw an increase in customers since July 2012 – up from 133,000 to 223,000 – and an increase in marketing spend overseas.

Next’s international franchise partners operate 168 stores in 32 countries while the retailer operates 17 directly-owned stores. It has closed 6 loss-making outlets in Sweden, Czech Republic and Germany, raising expectations that the international store operation will make a small profit of £11m for the full year. As its Chief Executive, Lord Wolfson, explains, the company’s product ranges appeal to the market in Britain and a small percentage of people overseas so these international customers can be served online. “We are not looking to open new stores,” he says. As far as international expansion is concerned, his view is that “caution is best”.

The areas in which the company is not yet trading online are Brazil (which has high import duties) and China. Lord Wolfson says that he’s not sure how big an opportunity these countries represent. And in terms of localisation, he sees no discernible difference in countries with a localised site or not.

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