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IREU Merchandising Report 2019

IREU Merchandising Report 2019

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How DFS is using the latest digital technologies as it balances its customers wishes to research online and visit the store

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How DFS is using the latest digital technologies as it balances its customers wishes to research online and visit the store

DFS today set out how it is deploying technologies from chat bots ad to augmented reality as it works towards its strategic aim of “leading sofa retailing in the digital age”.

 

The sofa retailer, ranked Top350 in IRUK Top500 research, has launched a customer service chatbot and says it was the first in its market in the UK to launch augmented reality on a mobile website last year, enabling customers to visualise a sofa in any room of their home. An innovation team is developing new customer propositions that are now trialled through online customer panels before they are piloted in physical showrooms. Data-led optimisation is also being used, in partnership with data science specialist Beyond Analysis, to information the distribution and selection of its product range. It s also investing in AI-enabled delivery


DFS said that online sales were 22.6% up on the same time last year in the first half of its financial year, with mobile web orders 72% ahead. More than 60% of all website traffic came via mobile, with traffic up by 9% year-on-year – reflecting the fact that more than 85% of DFS potential customers research their sofa purchase online.

 

Nonetheless, DFS says that more than 90% of its customers still visit one of its 117 showrooms to sit on, touch and feel sofas before they order. That’s logical, given that comfort is the primary reason, says DFS, on which customers choose a sofa. “For most of our customers the transaction is a significant investment and they value our local showroom presence, our colleagues’ expertise, advice and recommendations and feel re-assured by our fifteen-year guarantee and in-house repair service.

 

“Our business model is already set up to satisfy all elements of the customer journey in the digital age but we must remain on the front foot to maximise the opportunities available to us, and to compete effectively with new market entrants.”

 

As the retailer has bought other sofa companies, it had made space to showcase their products in its stores. It now has 33 Dwell and 10 Sofa Workshop showrooms, creating “a national presence for these brands without increasing our property costs.” Now it aims to make its latest acquisition, omnichannel retailer Sofology, into a national chain, and it is has opened five new showrooms so far, taking the retailer to a total of 42. That, it says, could well grow to as high as 70 in the medium term. It also sees opportunities to build on the digital aspects of its customer journey that already include a MySofology account where customers can get extra product information, and build baskets on their phones either at home or in-store with the help of a member of staff. “We see further opportunities to build on this brand’s innovative proposition,” DFS said today.

 

The figures

The update came as DFS said that revenue of £422.3m

in the 22 weeks to December 30 was 29.1% up on the same time last year, after a half-year period in which it bought Sofology. Adjusting to include the effect of that acquisition, revenues were 9.9% up on last time.

 

Reported pre-tax profits of £14.1m were 127.4% up on last time, although underlying profits of £32.8m were 23.8% up. Online sales grew by 22.6% over the period, while like-for-like sales were 6.6% ahead.

 

Sales growth, said the retailer, may have benefited as purchases were deferred from the final quarter of the previous year, which was marked by very hot weather, and also port-related issues caused the delivery of goods to be delayed to the current financial year. Nonetheless, it said, “we are still pleased with our top-line performance.”

 

DFS chief executive Tim Stacey said: “We are pleased with the performance for the first five months of the financial year across the group, with all four of our brands achieving like-for-like revenue growth. The benefits of our investments in our online channels, delivery networks and the development of our brands help mitigate the impact of a market which we expect to remain particularly challenging in 2019, given the current political and economic uncertainty. Notwithstanding a softer start to 2019, and assuming no weakening of this environment, our profit expectations for the financial year remain unchanged.”

 

DFS also sells in the Netherlands, where it says trading results have grown by an “encouraging” 29%.

 

The retailer said that Brexit would affect it in as far as its customers might lose confidence in making big purchases, and in that furniture might be held up at ports. But it does not expect to see a tariff impact since the goods it produces get a zero rate tariff under WTO terms. It employs EU staff in its UK operations as well as in its EU operations, but believes that their status will be protected in the short-term. However, it says, it will be important not to lose staff.

 

“We have seen reassurances from governments regarding the status of overseas nationals following 29 March 2019, and thus we believe that it is unlikely that there will be an immediate near term impact on our group,” it said. “We are however aware of a longer-term risk that EU nationals leave the UK and we therefore see wage inflation as companies compete to attract workers with appropriate skills and experience. To help mitigate this risk we continue to work hard on our employee engagement, to seek to ensure we continue to benefit from employee loyalty, and relatively low turnover.

 

 

Image courtesy of DFS

 

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