Reporting its annual results today (24 March), Next has forecasted the toughest trading conditions since the 2008 recession and predicted a weaker outlook for consumer spending for the rest of 2016.
Speaking at a press event, Wolfson said Next would invest £8m into the Next Directory user interface, online marketing and email campaigns this year. However, he is not convinced mobile will reignite the brand or convince consumers to spend amid the tougher market conditions.
He told Marketing Week: “I don’t think mobile will be the key to getting consumers to spend. I think its overall impact will probably be marginal. It is important we get it right as consumers are shopping in a new way and we are getting it right by upgrading various elements of our user interface and digital marketing. But I don’t think any of these steps will be game-changing, they are all just small improvements.
Earlier this month, Next switched mobile shoppers to a new mobile version of its site and the retailer said conversion had risen from 4.2% to 5.8%.
However, Wolfson admitted: “A lot of people still use mobile for amusement and not a serious shopping mission like a desktop PC. Next has had huge growth in trade on mobile phones, it has gone from 0% to 27% of our trade over the last five years.
“But although conversion rates are going up, it isn’t resulting in a significant sales uptick.”
Convincing consumers to spend
For the financial year to the end of January 2016, Next saw profits rise 5% to £821.3m as full-price Next branded clothing sales increased 3.9%. Next, however, predicted sales of full-price items could fall by 1% in 2016. This prediction marked a sharp contrast from January, when Next said it expected sales to rise by between 1% and 6% for the year.
Next said there might be a “cyclical move away from spending on clothing” with growth returning to experience-related expenditure, such as eating out, travel and recreation over clothing.
To combat this shift, Wolfson told Marketing Week that the fashion retailer would be upping the number of in-store cafes but, due to “difficulties”, it had no current plans for any tie-ups with restaurant brands to make the most of this “cyclical swing” towards dining out.
He added: “We have a lot of branded cafes in our stores that drive footfall, we’ve added 90 into our stores over the last five years. Property moves slowly so we won’t hit 180 overnight but we will continue that rollout to get more shoppers through the doors.
“There is also room to improve the Next stores by getting more natural light and changing the shop fittings. [If more people are investing in nights out] then there’s an opportunity in adding more evening wear too and we will look at investing in evening clothing ranges. It won’t make a big difference but it will help.”
An £8m investment in marketing Wolfson was also keen to highlight that Next would continue to support the 1.8 million customers who receive Next Directory catalogues. However, he acknowledged that the rise of ecommerce means many Next shoppers “no longer require” catalogues.
As such, the £8m marketing investment will be focused on recruiting new customers and doing more to retarget existing customers.
“There is an opportunity to be more effective in the way we deal with customers who don’t want catalogues and the ones who are more sporadic customers that use multiple retail sites,” he added.
“The recruitment of new customers to the Directory is still primarily through stores and we don’t anticipate that to change. But there is definitely an opportunity to improve our online marketing.”
Online advertising campaigns must achieve an ROI of at least 30%, according to Wolfson, meaning Next must chose new online marketing channels “wisely.”
He concluded: “We’re still learning from social channels and have to choose wisely to ensure they achieve that rate of return. We are not sure which channels will be the most productive to us but we will soon learn.”