Next’s digital focus pays off as online sales surge

Capitalising on its decision to double down on digital marketing, Next saw full price sales rise 20% in the eight weeks to Christmas, a full £70m ahead of previous guidance.

Online sales rose by 45% over the period in question, with Next own brand online sales up 31% and UK sales of third-party brands up 85%. During the period online overseas sales also increased, up 36%.

By contrast, UK and Ireland retail sales fell 5.4% during the eight weeks to 25 December.

The group’s guidance for its full year profit before tax has now risen by £22m to £822m, 9.8% ahead of 2019 figures.

Full price sales are an increasingly important part of the mix for Next, up 21% during the eight weeks to Christmas. Stock available for the end-of-season sale was down 18% compared to two years ago, attributed to better than expected full price sales.

When it comes to pricing, Next expects total average selling prices to increase by more than the like-for-like price increases, a consequence of consumers choosing to buy slightly fewer items at moderately higher price points.

Next saw a “strong revival” in adult formal and occasionwear during the Christmas trading period and despite experiencing supply chain issues, the retailer claims its overall sales success is testament to the “strength of underlying consumer demand”.

Next continues to ramp up digital marketing spend as online sales surge

The business considers forecasting for the year ahead “unusually difficult” and even assuming no further disruption from Covid, Next expects uncertainty to persist around issues of inflation and the level of pent-up consumer demand.

From a marketing investment perspective, Next is poised to continue ramping up marketing spend to higher than pre-pandemic levels, choosing to push its digital channels instead of physical stores.

CEO Lord Simon Wolfson said last April that the retailer saw no value in using marketing spend to pull customers back to physical retail.

“The most important thing you can do to draw people back in is to open the doors,” he said. “Of course there are things you can do to draw people back to stores, you can spend a lot of money doing that. The real question is whether it’s profitable.”

He added that Next had “pretty much stopped” marketing spend other than via online channels.

The move appears to have landed well with consumers. Total online sales for the full year rose by 49% compared to 2019, versus UK and Ireland retail sales, which declined by 24% for the year. This reflects results posted by Next in November, which revealed online sales had driven a £4m profit for the business.