Comment: What next for Next?
It might be a good few years since I interviewed the chairman of Next, David Wolfson, but I can clearly remember the conversation, which related to a story I was writing about the online store the company had just launched.
I got the impression he was less than enamoured by the prospects for this internet thing that admittedly delivered a pretty clunky shopping experience at the time. When I asked for his opinion on the new initiative he replied: “Let’s just say it’s a very, very, very, very, very, very small part of the Next business. That’s six verys.”
He is not alone in having underestimated the potential of the online channel but thankfully Simon Wolfson – still in his thirties at the time – was the newish CEO and no doubt the driving force behind the move. Today this once little endeavour now generates around two-thirds of Next’s revenue.
Over time the Next Directory online subsumed the catalogue-based original – which was itself a powerhouse of an operation – and the remaining online business was rebranded simply as Next Online in 2018. This very much highlights what Next has been good at over the years under Wolfson – to both roll with the market and continually push forward with new initiatives.
Next has proven to be rather an apt name for the business although maybe Next? would have been a more suitable moniker because the company’s management always seems to be asking itself the question of what it should do next? Unlike many businesses though it also acts on its deliberations that are undertaken on the basis of a combination of instinct and data.
As the online store has successfully grown from its very-times-six stage this has also brought about myriad challenges over the years for Wolfson. Balancing the store estate with the growth of online sales has proven to be a particularly tough nut to crack for many established retailers and has contributed greatly to the downfall of many.
Next has been a case study of how to handle this challenge as it has methodically calculated the value of each store – taking into account not just its own sales but also its contribution to online sales within a certain radius of the store and its worth as a hub for click & collect – and pitched this against the rental and current status of the lease.
This has resulted in an ongoing programme of openings, rental negotiations, site relocations, and in some cases closures if the spreadsheet does not justify the continued existence of a particular store. None of this has involved knee-jerk mass store closures with expensive liabilities as has been seen at other retailers.
The other challenge Next faced was developing the complex infrastructure that supports a very high volume multi-channel business. Many organisations have used a combination of elastic bands, sticky tape and a lot of fudging whereas Next in contrast has made such a success of its back-end technology and fulfilment capabilities that it has created the Total Platform that it sells to other retailers.
The Platform leverages the company’s infrastructure by offering a complete suite of online services to third-party brands; providing services such as websites, marketing, warehousing, distribution networks and contact centres.
This is proving to be increasingly lucrative and has given Next the confidence to buy a variety of retailers and take meaningful share stakes in an array of others that it can plonk on its Total Platform and immediately reap the benefits of driving efficiencies and synergies. So far its investments include Gap, Made.com, Reiss, Joules and Cath Kidston.
We can expect the company to make many further such moves as it capitalises on its relative strength in the retail marketplace while at the same time management will no doubt be continuing to ask the question what Next?
