The clothing and homeware giant now says it will focus on digital advertising, and it plans to more than double its spend in 2019. This is at the expense of budgets for print, TV and direct mail, which face cuts of 50%.
The company’s half-year sales were up 3.8% overall. But the uplift was entirely a result of rising online sales. Online revenues rose 16% to £892.3m, which included income from customers’ credit accounts, while in-store revenue fell by 6.9% to £925.1m.
Chief Executive Lord (Simon) Wolfson told Marketing Week that traditional media could “definitely” not deliver the payback on investment they once did, while digital ad spending was bringing “impressive” returns.
As a result, Next’s digital marketing budget will be boosted by 125% in 2019, up from £12m to £28m; the main focus will be on mobile.
The spend for direct mail, print and TV is set to halve from £23m to £11m. The company is also cutting back on promoting sales via its catalogue, cutting spending from £103m in January 2018 to £92m in January 2019 – an 11% decline.
Next was a pioneer of fast-fulfilment home clothes shopping in the UK with the launch of its “Directory” catalogue in 1988. And although the company still issues “well over a million” catalogues a year, and Wolfson says they still appeal to Next’s “best customers”, online sales now make up almost half of total business.
Wolfson said Next had enough resources to grow its online sales by £1.5bn in the next five years, but he believes that customers’ migration online will eventually slow and that company needs to stay flexible in order to adapt to high street retail.
“Turning it from a retail-only business into an online platform that includes the stores, that process is still extremely arduous and hard, but we’ve reached a point where this year it looks like we’ll be able to stabilise profits,” Wolfson said.
“We’ve got the general direction of travel, but we cannot predict the speed nor the endpoint of this change.”
On Brexit, Wolfson, a prominent Leave supporter, forecast that the worst-case scenario of the UK leaving Europe without a trade deal would cost the retailer approximately in £20m in extra duties. This would add 0.5% to prices, “at most”.
Sourced from Marketing Week, Financial Times; additional content by WARC staff