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IRUK Top500 The Customer Report: 2018

IRUK Top500 The Customer Report: 2018

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Industry News - November 2018

Chloe Rigby highlights recent industry changes.

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DEBENHAMS SETS OUT FUTURE PLANS

Debenhams has set out its plans to reshape its store estate and online presence against the backdrop of a ’volatile and challenging’ retail market. The department store group, a Leading retailer in IRUK Top500 research, reported online growth of 12% ahead of the market in its latest financial year, thanks to an improved mobile and customer experience – but it was forced to write down the value of its stores. It now plans to close up to 50 under-performing stores over the next three to five years – from a store estate of 165 stores.


The update came as Debenhams reported revenue of £1.8bn in the year to September 1. That’s 3.2% down on the same time last year. Underlying pre-tax profits of £33.2m were 65.1% down on the last time, but exceptional items of £524.7m took the retailer to a bottom-line loss of £491.5m – from a profit of £59m last time. Those exceptional items included £12.3m related to the Debenhams Redesigned transformation strategy, and a £512.4m write-down in the value of stores and goodwill, write-offs of IT systems (to the tune of £80m) and provisions for store leases.


The retailer is now reducing its capital expenditure to £70m and making cost savings of at least £30m a year, through store closures and plans for rent reductions. It believes that around 110 of its 165 stores are over-rented, at a cost to it of about £12m and it is now talking to landlords about that issue, “benchmarking against recent changes achieved by some competitors.”
In the future, Debenhams expects digital to account for about 30% of its business, centred around mobile interaction with customers. Currently digital stands at about 20%.

 

Over the year, digital sales grew by 12% – and over the second half alone, they were up by 16%. Demand via mobile devices was 20% ahead of last year, with mobile now accounting for 60% of all demand, something Debenhams puts down to an agile development programme that it said had driven “significant improvements in speed and filtering.” Conversion via smartphones rose by 17%.


It is now working with Mobify to separate its digital customer experience from the underlying platform “in a way that allows us to drive faster, positive changes.” It will move desktop to the Mobify platform from February 2019. As a result, it says, it will provide “a consistent and scalable experience across all our customer-facing digital channels”.


It is building online ranges to have the “most exciting and authoritative range and the strongest availability.” Online analytics will inform range decisions, based on customer search, and will lead to it introducing the brands and products that its customers are looking for.


It also aims to boost its visibility on key products and brands in local mobile search, and, it says, “We are working with Google to surface local store information alongside visual shopping ads to drive traffic into stores.”


The retailer aims to use its stores to maintain a leading position in the beauty market.

 

UK SALES LIFT FOR IKEA

Ikea UK has reported annual sales of £1.97bn in its 2018 full-year – up 5.9% on the previous year – after 12 months in which it invested both online and offline to offer the seamless service its customers now demand.


The home furnishings retailer, which is ranked Top250 in IRUK Top500 research, says online sales rose by 14.4% to represent 15.5% of total sales during the year to August 31 2018. Visitor numbers increased both online and in-store: 59.8m (4.5%) people visited its UK stores, while its website received 199.3m (+13.4%) visits.


“Our stores will always be an important part of the Ikea brand when it comes to inspiration, touching and feeling our products,” said Javier Quiñones, Country Retail Manager at Ikea UK. Investment in stores included a total revamp of Ikea Nottingham, reworking of the Milton Keynes textiles stores and its first city centre store in the UK, on London’s Tottenham Court Road.


As well as opening new stores, Ikea has also invested in its distribution and fulfilment, opening two new customer delivery centres and a parcel unit in London. As a result, said Ikea, delivery lead times reduced and parcel deliveries rose by 65.9%.

 

MORRISONS REPORTS SALES GROWTH

Morrisons has reported sales growth as the supermarket expanded its online, wholesale and in-store services. Online, the retailer launched the Morrisons More app and expanded its home delivery service, while the supermarket also added new wholesale customers.


The supermarket, ranked Leading in IRUK Top500 research, reported total group sales, excluding fuel in the third quarter of its financial year, up by 6% compared to the same time last year.
Morrisons launched its loyalty app, Morrisons More, during the year.

 

Shoppers can use it to collect and redeem their loyalty points digitally, while the supermarket uses it to send personalised offers and recipes direct to the customer’s mobile phone. Points can also be earned in a trial to test the viability of reverse vending plastic bottles, currently underway at stores in Skipton and Lindsayfield.


The supermarket has also expanded its delivery services for online orders to a second fulfilment centre at Erith, North London, while its pick-from-store service expanded to six further stores, taking the total to 20.

 

PROFITS FOLLOW COST-CUTTING AT NEW LOOK

Multichannel retailer New Look said that its turnaround programme was starting to make a difference at the bottom line as it reported falling sales but growing profitability in the first half of its financial year.


The fast fashion brand, ranked Leading in IRUK Top500 research, reported sales of £656.9m in the six months to September 22, down by 4.2% on the same time last year, but an underlying operating profit of £22.2m – from a loss of £10.4m last time. Earnings before interest, tax and asset write-downs (EBITDA) came in at £49.8m from £24.2m last time.

 

The retailer said that the fall in sales was in line with expectations, and came as it focused on more profitable sales.


New Look said that in-store and ecommerce conversion rates had improved since the first quarter of the year, and that ecommerce profitability had continued to increase “substantially”. Some 41% of online orders were picked up in store – up from 28% a year earlier. The service, said New Look, was helping to drive footfall into stores.


The update comes a year after New Look declared a back to basics approach under the resumed leadership of Executive Chairman Alistair McGeorge. Since then, the retailer has worked to rebuild its position in the UK womenswear market and won backing for a company voluntary agreement that will see up to 60 stores close and reduce rents on 393 stores by between 15% and 55%, while making up to 980 people redundant.

 

It has pulled out of its Chinese retail business, where both sales and profits had fallen short of targets. Annualised cost savings were worth £70m over the year with the retailer identifying a further £8m in future savings.

 

TECH RECRUITMENT FOR AMAZON UK

Amazon says plans that could see 1,000 new high-skilled jobs created in the UK, opening a Manchester corporate office and investing further in its Edinburgh and Cambridge development centres, are about bringing Silicon Valley jobs to Britain.


The retailer, ranked Elite in IRUK Top500 research, says it will create capacity to employ up to 600 people in 90,000sq ft offices in the Hanover Building in Manchester’s Northern Quarter, where projects under development will include machine learning, research and development (R&D) and software development.


It will also create the space to house a potential 250 people at the Edinburgh development centre, at Waverley Gate, which focuses on new advertising technology and personalised recommendations. Investment at the Cambridge site will create capacity for 180 new jobs, working with R&D teams that work on innovations for Amazon Alexa, Prime Air, and Amazon Web Services (AWS).


“With the UK taking a leading role in our global innovation, we are delighted to announce plans to create capacity for more than 1,000 highly-skilled roles across the country,” said Doug Gurr, UK Country Manager, Amazon. “These are Silicon Valley jobs in Britain and further cement our long-term commitment to the UK.”


By the end of this year, Amazon expects to employ more than 27,500 people in the UK, including more than 6,500 in its corporate, AWS, and R&D divisions following investment since 2010 of more than £9.3bn. It also says that 85,000 people in the UK are employed by businesses that sell on Amazon.

 

SOCIAL SHOPPING BOOST FOR MONSOON

Monsoon is experiencing an increase in website dwell time following the launch of shoppable social technology on Facebook, Instagram and Twitter. The high street fashion and homewares retailer has reported a 29% rise in the time customers spend browsing when interacting with Curalate’s Showroom function, compared to those going straight to the website.


Monsoon is in the process of testing the technology that turns any image or video into a virtual pop-up shop, enabling consumers to discover and purchase a range of recommended products from any social post.


“When customers are reaching Monsoon’s website via a Showroom post as opposed to organic web traffic, we’re also seeing an 18% reduction in bounce rates as people explore products beyond the landing page,” says Robyn Molyneux, Senior Content and Social Media Manager, Monsoon.


Monsoon is using Curalate’s Fanreel function too, where customer images shared on social channels are curated in the #MyMonsoon gallery on the retailer’s home page.


“We’ve had an increase in the quality and quantity of our UGC as a result,” Molyneux continued. “Shoppers post strong imagery, and we get a lot featuring childrenswear which is great as this is a big area of our business. Customers seeing others wearing their purchases is having a positive effect on our conversion rate and order value.”


Monsoon’s sister brand Accessorize also uses Curalate’s social commerce technology.


“Images posted to social media are becoming the modern day storefront, introducing consumers to products they never knew existed and bringing them inside,” says Apu Gupta, CEO of Curalate.

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