Debenhams: updates on a customer and mobile-focused strategy
Debenhams today said it had made good progress with its new Debenhams Redesigned strategy, through which it aims to become a leader in social shopping, becoming a destination, digital and different – as well as more efficient.
The department store outlined the key changes it was making to the business, from a mobile-centred strategy with an upgraded mobile website to establishing test labs, as it reported full-year sales of £2.3bn in the year to September 2, 1.1% up on the same time last year. UK sales of £1.9bn were 0.7% down on last time, while international sales of £604.1m were 11.1% up. Pre-tax profits reached £95.2m before one-off costs. That's 16.6% down on the previous year. Costs of £36.2m, related to the strategic review and the restructuring of its warehouse and logistics business, meant that at the bottom line, pre-tax profits of £59m were 42% down on last time.
Sergio Bucher, chief executive of Debenhams , said: ""We are making good progress with implementing our new strategy, Debenhams Redesigned, and are encouraged by the results from our initial trials, as well as the number of exciting new partners who want to work with us. There is a lot to do but I am delighted with the enthusiasm and flair shown by my colleagues as we embark on this journey. I'd like to thank the whole team for delivering these results against a background of rapid change in the business.
"The environment remains uncertain and we face tough comparatives over the key Christmas weeks. However, we are well prepared for peak trading and the early signs from our activity to date confirm that we are moving in the right direction towards a successful and profitable future for Debenhams."
Here are the highlights of its multichannel strategy.
Mobile and crosschannel
Debenhams reported digital sales growth of 12.7% in its latest full year, with mobile accounting for 55% of online orders and smartphone conversion rates lifting by 15%. The year, said the retailer, saw an agile approach to web development with improvements including a new payment page and new beauty brand presentations. In future, says Debenhams, smartphones will be its primary customer engagement channel, and it has partnered with Mobify, for the tech platform, and Sapient Razorfish, for development and support, to develop a progressive web app that it says has already delivered a "step change in our mobile site, significantly improving speed and responsiveness."
The new "progressive app" is designed "to combine the best features of mobile apps and mobile web" and to "improve user experience and enable much faster and more responsive customer interaction." In future the innovative approach to mobile, which is backed by Google, will, says Debenhams, improve the user experience, enabling faster and more responsive interaction with customers, and supporting push technologies and enhanced search engine optimisation that will underpin its work to personalise customer relationships.
It has also worked to improve digital imagery.
Debenhams aims to become a customer-led business, and in order to achieve that is reducing the tasks that store staff take on, freeing up 2,000 staff and moving them into customer-facing roles, with a new mission of making shopping "confidence boosting, sociable and fun". Customer service measures are now part of its key performance indicators and already, it says, it has seen "significant progress in net promoter scores".
Debenhams also plans to develop a new 'in-home'sales channel through its Beauty Club customer base. This, it said, would provide "an opportunity to build a still-closer relationship with our customers."
Debenhams is testing a new customer experience through two new stores that are acting as "test labs" for new ideas. Those ideas include choosing in-store stock in line with online demand in the catchment area. This has worked particularly well, it says, in its womenswear and home departments. New approaches to layout and merchandising are also being tested, while a new operating model in Stevenage is "cheaper and more flexible than our traditional store model." The store's home department, it said, was trading alongside top stores in the chain despite trading from half a typical footprint and with 35% fewer SKUs. The stores in Stevenage and Wolverhampton have so far performed ahead of plan.
"We will review progress over peak and apply the lessons learnt in more locations in the spring," said Debenhams in today's results statement. In those stores it has reduced the options on offer but focused on improving the service proposition. It aims to become a primary destination for lingerie and footwear and it will also open beauty bars in key locations including London's Oxford Street following its acquisition of a minority stake in digital beauty services provider blow LTD.
The retailer has closed 10 regional warehouses as part of its plan to simplify and focus its operations. Branches in Eltham and Farnborough, among 10 stores identified as at risk of becoming unprofitable over time, are to close, while the retailer is also moving out of four franchise markets and may close more franchise stores.
Debenhams is now operating from a single warehouse management system, as of May, and now has direct-to-floor distribution that has enabled it to declutter the sales floor and hold stock int he distribution centre till needed. Replenishment now takes place more frequently, while stock options have reduced by about 10% as part of a strategy to increase full-price sales.
The retailer is investing in digital for its Magasin du Nord business, which is expanding throughout Scandinavia. It is also expanding via third-party online sites and marketplaces such as Asos, Label, Very, Zalando, Amazon Prime and Amazon.de.