Chloe Rigby highlights recent industry changes.
OCADO AND M&S SIGN £750M PARTNERSHIP DEAL
Ocado is going into business with Marks & Spencer, as it sells half of its UK retail business to its new partner for £750m.
The business will continue to trade as ocado.com and operate from the Ocado Smart Platform but will have access to M&S’s brand, products and customer database from September 2020, after Ocado’s current agreement to deliver Waitrose groceries expires.
Ocado brings to the partnership its Ocado Zoom same-day delivery service, which is first being trialled in London. M&S brings access to seven million members of its Sparks loyalty club and three million M&S Bank customers. In total, say the partners, the joint venture will benefit from access to more than 12m M&S Food shoppers.
The two say that the joint venture is a “strategically compelling route to unlock growth for M&S Food through a profitable, scalable presence in the online grocery market, the UK’s fastest growing channel.”
In the year to December 2, the two say, the new joint venture would have generated revenue of £1.5bn and EBITDA of £34.2m.
Steve Rowe, Chief Executive of M&S said: “I have always believed that M&S Food could and should be online. Combining the strength of our food offer with leading online and delivery capability is a compelling proposition to drive long-term growth.
“Our investment in a fully aligned joint-venture with Ocado accelerates our Food strategy as it enables us to take our food online in an immediately profitable, scalable and sustainable way.
“Combining the magic of M&S Food with Ocado’s leadership in online technology allows us to transform UK online grocery shopping by offering customers the broadest, most innovative and relevant range in UK food retail with award-winning service. Our partnership with Ocado will create shared value for our customers, colleagues, supplier partners and shareholders, operating with a common sense of purpose and values.”
The new joint venture means that Ocado splits out its online grocery business from its fast-growing technology business which is enabling retailers around the world to tap into Ocado Smart Platform and related fulfilment services for their own ecommerce grocery delivery services.
M&S meanwhile, says the new venture will be a key part of its transformation programme to create a profitable family of businesses within three to five years “bound together not only by shared sites but by a shared consumer brand, colleagues, values, technology and customer data.”
ONLINE GROWTH FOR H&M
H&M has reported a 22% lift in online sales in its latest full-year figures, after twelve months in which the Swedish fashion retailer moved to futureproof its business and to further integrate store and online sales across its markets.
It reported a 5% increase in net sales to £18bn (SEK 210.4bn) in its latest financial year, to November 30 2018. Gross profits came in at £9.3bn (SEK 110.9bn), up by 2.5% from £9.2bn (SEK 108.1bn) at the same time last year. Online sales came in at SEK 30bn (£2.5bn) in the full-year. Ecommerce accounted for 14.5% of total group sales.
All of H&M’s 47 online markets are now on the same platform, following the migration of its German website, and it will launch ecommerce in Mexico during the coming year, and, through a franchisee, in Egypt.
In 2019, the retail group aims to add a net 175 new stores across a variety of its brands, while continuing to invest in a more convenient shopping experience – adding services such as click and collect and the ability to return items bought online to the store. Three new fulfilment centres were opened in Q4 to increase capacity, especially for online sales.
UK online sales grew by 38%, while store sales fell 1% resulting in overall growth of 8%. Sales grew in physical stores and online in China (+24%), India and Russia.
EBAY FOCUSES ON UX
EBay has reported revenues of $2.9bn (£2.2bn) in the quarter to December 31 – up by 6% on the same time last year. In the full-year the US-based marketplace reported revenues of $10.7bn (£8.2bn), up by 8% on the previous year.
It said active buyers had grown by 4% during the quarter, taking its total to 179m active buyers around the world. Marketplace sales delivered revenue of $2.3bn (£1.8bn) during the fourth quarter.
“We delivered record earnings for the fourth quarter and full year 2018,” said Devin Wenig, President and Chief Executive, eBay. “In 2019 our focus will be on further improvements to the eBay user experience, while pursuing significant long-term growth opportunities in advertising and payments. We are confident in the strength of our business and future growth prospects, as demonstrated by our decision to institute eBay’s first-ever dividend and increase our share repurchase programme.”
Services launched during the year included the launch of installation services for those buying auto, home and electronics goods, and the expansion of eBay Authenticate to the jewellery category. EBay Instant Selling was launched, enabling consumers to sell their smartphones and get paid immediately through an eBay voucher.
AMAZON FY RISES BY A THIRD
Voice commerce continued to lead the way for Amazon, as it reported net sales up by 21% in its fourth, Christmas, quarter – and up by 31% in the full year.The Echo Dot, one of Amazon’s own-brand voice commerce devices, was the best-selling item around the world, and the retailer now has doubled its Alexa team.
Meanwhile, the retailer said that small and medium-sized marketplace sellers were responsible for 50% of products sold over the holiday period, and that their sales were now growing faster than its own direct sales.
The US retailer, which is also the UK’s leading pureplay – ranked Elite in IRUK Top500 research – reported net sales of $72.4bn (£55.4bn) in the quarter to December 31, 21% up on the $60.5bn (£46.3bn) it reported at the same time last year. Net income – or profits – increased to $3bn (£2.3bn) in the fourth quarter, up from $1.9bn (£1.5bn) a year earlier.
Over the full year, net sales were 31% up at $232.9bn (£178.3bn), while net income stood at $10.1m (£7.7bn), up from $3bn (£2.3bn) a year earlier.
Looking ahead, Amazon is forecasting a slowing in growth, with sales expected to be up by 10% and 18% in the first quarter of 2019. However, operating income is expected to be up by between $2.3bn (£1.8bn) and $3.3bn (£2.5bn), from $1.9bn (£1.5bn) in Q1 2018.
“We improved Alexa’s ability to understand requests and answer questions by more than 20% through advances machine learning, we added billions of facts making Alexa more knowledgeable than ever, developers doubled the number of Alexa skills to over 80,000 and customers spoke to Alexa tens of billions more times in 2018 compared to 217,” says Amazon Founder Jeff Bezos.
There are more than 28,000 Alexa-compatible smart home devices available from 4,500+ brands. More than 150 different products have Alexa built in, from headphones and PCs to cars and smart home devices.
LEGO CLOTHES SELL TO SNAPCHAT USERS FROM AN EMPTY SHOP
Pushing the boundaries of in-store experience, a range of Lego-themed clothes for adults went on sale in a totally empty pop-up shop during London Fashion Week. Kabooki, the company behind the Lego Wear license, launched the limited-edition collection for adults, in the pop-up store with nothing inside it except a Snapcode – a sort of QR code for Snapchat – on a plinth.
When customers load up Snapchat, the be-plinthed Snapcode acts as a portal into an augmented reality (AR) fashion boutique, where they could browse and buy the limited edition range of streetwear clothing.
The virtual boutique featured an interactive DJ booth, an arcade machine and, most importantly, exclusive access to the limited-edition fashion range. Visitors who ‘walk in’ via their phone were able to browse products placed on Lego mannequins and buy online through an integrated ‘Shop now’ feature.
The launch was a global first for the brand and was set up with the aim of driving traffic to the Lego Wear ecommerce site.
“We loved the idea of experimenting with a new and innovative digital customer experience together with the Lego team. Approaching the adult fashion audience with this limited-edition clothing line through an AR experience is something we have never done before,” said Birgitte Holgaard Langer, Chief Operating Officer & Chief Marketing Officer at Kabooki before the launch.
FUNDING & TRANSFORMATION FOR DEBENHAMS
Debenhams has put funding in place in order to give it the financial space to turn its business around. The multichannel retailer said that it had extended its lending to give it access to another £40m over the next year as it continues to put its Debenhams Redesigned strategy in place.
The strategy aims to transform it from a legacy department store business to one that employs new mobile and digital tools to engage shoppers at a time when they want to do more of their shopping online, and spend less time in stores.
Debenhams Chief Executive Sergio Bucher said that the announcement “represents the first step in our refinancing process. The support of our lenders for our turnaround plan is important to underpin a comprehensive solution that will take account of the interests of all stakeholders, and deliver a sustainable and profitable future for Debenhams.”
The retailer also said then that it plans to close up to 50 under-performing stores over the next three to five years from a store estate of 165. Its plans include focusing on its own brands, and the retailer, ranked Leading in the latest IRUK Top500 research, said it had struck an agreement in principle with Li & Fung for the LF Digital platform to improve its supply chain visibility. “This,” said Bucher, “will help us anticipate and respond more quickly to trends and our customers’ preferences, as well as delivering better quality product.”
