Debenhams today said its strategy to connect stores and digital through customer engagement was paying off – despite falling profits and sales in its latest half-year.
The department store, a Leading retailer in IRUK Top500 research, has focused on social shopping that links both stores and digital in a Debenhams Redesigned strategy, announced last April, that aims to change the business to reflect the way that customers’ shopping habits are changing. But today it reported revenue of £1.3bn across the group in the 26 weeks to March 3. That’s 2.4% down on the same time last year. UK sales were 3.7% down at £1.06bn, while international sales of £253.3m were 3.5% ahead. Pre-tax profits before one-off costs came in at £42.2m, down by 51.9% on last time, but at the bottom line after exceptional items totalling £28.7m, pre-tax profits of £13.5m were down by 84.6%. The final week of the first half was disrupted by snowfalls dubbed the Beast from the East, which saw almost 100 stores close during its ‘new season spectacular’ promotions.
The department store said, nonetheless, that digital was growing ahead of the market, thanks to improvements to its website and mobile platform. At the same time, it had seen “encouraging” results from trials of new store formats, now being rolled out to around 35% of its UK stores.
Chief executive Sergio Bucher said Debenhams was moving faster than ever to respond to a “profound change” in the UK retail market by delivering a Debenhams Redesigned strategy.
“Digital growth continues to outpace the market,” he said, adding: “We are holding share in a difficult fashion market and in other categories such as furniture exciting new partnerships have the potential to transform our offer. We approach the remainder of the year mindful of the very challenging market conditions, but with confidence that we have a strong team and the right plan to navigate them and return Debenhams to profitable growth.”
Here’s what the retailer said about its multichannel strategy.
Mobile and crosschannel
Investment focused primarily on mobile has helped to drive “above market digital sales growth” of 9.7% along with improved conversion rates, the retailer said. Digital sales accounted for 21% of the UK business in the first half of the year. Sales of beauty products were particularly high, growing at 16% year-on-year, while digital sales also grew faster over the Christmas peak trading period.
Debenhams’ mobile site, it said, is now its fastest growing store, with more than 150m visits a year and revenues now approaching £250m. Orders placed via a smartphone grew by 35% in the first half and accounted for 33% of digital sales. Conversion rates via the devices have been boosted by 16%, thanks to the implementation of progressive web application technology, in partnership with Mobify, with a particular focus on improving mobile website speeds. PWA has also been used on its Irish and international websites “with an even more positive response”, and has now launched on tablets, with account for 25% of digital sales to early positive results. Desktop improvements are to follow.
The retailer has focused on improving photography and presentation in categories such as lingerie, swimwear, and mens and women’s clothing. Up to 300 small improvements to the mobile shopping experience have been made through a focus on online analytics and multi-variant testing.
The next phase of the strategy is a focus on search, as it looks to speed up the rate at which customers “get to products”. In today’s results it said: “Currently only 60% of browsing customers reach this point in the transaction and each percentage improvement should deliver a meaningful sales contribution.”
Debenhams promises a “more aggressive” approach to digital marketing, especially focused on improving store visits. “Already one third of digital transactions include a store as part of the journey,” it said. “The ability to interact with mobile customers – via push notifications, for example – will support our ambition to drive faster digital growth as well as to personalise customer relationships.”
The department store also plans to build on its interaction with customers, both via digital and social channels. It is launching a next generation interactive beauty club that makes the most of improved mobile capabilities. Six beauty brand pages are launching online, promising improved search visibility. Its Beauty Club loyalty programme, relaunched last year, now has 1.3m “engaged” customers.
Debenhams said it had gained double digital improvements to its net promoter score through a ‘service redesigned’ strategy that trains staff to be more customer-focused.
‘Social’ store formats
Debenhams is developing a “Beauty Hall of the future” concept that will include interactive and digital elements as well as services and events. It says that “elements” of the new format will launch in around 20 more stores in time for Christmas trading.
It is also testing new approaches to in-store food: its Stevenage store has a Nando’s, while it has tested a Loaf & Bloom concept at two sites, where it says it is outperforming previous food offers.
The retailer is working with furniture brands including online retailer Swoon Editions and Maisons du Monde through partnerships that it envisages will replace its own loss-making bought furniture business.
Operations and logistics
The retailer has flattened management structures, removing 320 management roles in store, and others in UK support centres.
Distribution is now direct-to-store-floor, and some shops are now receiving fully sorted deliveries with its distribution centres now in the first stage of automation.
A new central planning function, launched in February 2018, now focuses on merchandising and planning ranges more closely to the customer. This, said Debenhams, was “an important part of our plan to build our ranges online first, using data analytics.”
Debenhams’ European arm, Magasins du Nord, plans to become “the destination for the best Scandinavian brands to the world online”. It is launching click and collect across its stores, which soon include new branches in its home market of Denmark as well as Sweden and Norway.
Debenhams is focusing on the Middle East, South East Asia and Australia through existing franchise partnerships, and recently opened its largest international store in Kuwait, where it applied lessons from its UK “test lab” Stevenage store. It is also investing in taking its brands to third party websites, including its Baker lingerie and childrenswear range which will be sold on Ted Baker’s own website. “We intend to build on these differentiated brands with international appeal that can leverage our resource and infrastructure to be marketed both inside Debenhams and via selected external partners,” said the department store.
Image courtesy of Debenhams.