2023 is a worrying time to be a bricks-and-mortar retailer. Soaring energy costs, rising inflation, Covid-conscious consumers and declining footfall meant almost 50 shops a day closed last year across Britain’s high streets. Many retail giants, previously considered mainstays of British consumerism, have toppled as a result of this including House of Fraser, Debenhams and the Arcadia Group (Topshop and Topman). Yet, in January 2022, Next announced record high Earnings per Share and a huge pre-tax profit of £823m. They appear to not only be weathering this retail storm, but actually thriving. So what is the key to their success and how can other businesses learn from this?

Physical vs. digital shopping

For many traditional clothing retailers, the digital explosion of online-only clothing retailers (e.g. ASOS or Boohoo) came as a surprise and were viewed as a separate business model that could not coexist alongside physical stores. Instead, Next took an early, proactive approach to implement digital technology at all points along the customer journey to drive sales. They first launched their online shopping website back in 1999 alongside their physical Next Directory and retail stores. Two decades later, Next has a slick website and app ecosystem, focusing on creating a high-performance experience that encourages consumers to keep coming back for more. In fact, Next.co.uk had the second-largest online share of voice in Q3 2022 in the UK fashion industry, besting competitors like Boohoo.com and Marksandspencer.com, suggesting they are an online powerhouse setup for the future.

Next’s focus on the digital experience paid dividends during the pandemic, where Scott Bebbington, Business Recovery Senior Manager at PKF Francis Clark said “Next’s online presence was strong before the pandemic and store closures even started which meant it was well able to offset the loss of sales from its stores.” This highlights the importance of being an adopter of new technology and innovating a high-performance digital experience, as it not only has allowed Next to maintain a loyal customer base for decades, but also enabled them to weather the detrimental effects of the pandemic

The ‘Next Ecosystem’

Next have also created a cyclical ecosystem that naturally drives customers to return to the store and website. With most online orders, Next offers a free next-day-delivery service to store which allows the customer to pick it up at their own convenience. This is an intelligent way of using their online presence to nudge customers into their local high street stores and drive upsell. I am susceptible to impulse purchases when products catch my eye while waiting for a parcel in store; products I never would have purchased if I had ordered the delivery to my flat.

Next also offers a digital subscription similar to Amazon Prime which offers free home delivery for £26 per year, creating another revenue stream for customers who might not live near a store but still want fast delivery. Finally, they offer NextPay (a credit scheme) that comes with a myriad of benefits, including early online access to the Next sale – once again encouraging customers to interact with the brand again and again. The various touch points within Next’s ecosystem allows consumers to interact with the brand on their terms, and also drives a constant cycle of upsell purchases as consumers return to store to pick up their next-day-delivery orders, or use their NextPay card.

Strength of the Next brand

Having worked myself as a retail assistant in a Next store over a number of years, I can attest to the power of the Next brand, especially over the festive period. For some customers, queuing up at 5am on a cold Boxing Day morning for the Next sale is a holiday tradition as important as roast turkey or mistletoe. The brand is associated with high quality for a reasonable price and this drives customers to return to the store time and time again. Much of the appeal for customers is also in the wide variety of products that Next sell. When walking into a store or browsing their website, customers are presented with a wide array of womenswear, menswear, children’s clothing, home, furniture, shoes and toiletries. There is also depth as well as variety. In the last five years, the number of lines within the Next Brand has increased from 22,900 to 58,300 (a huge increase of +155%). By ensuring they cater to all consumer segments, Next ensures they avoid alienating customers and maintain their strong reputation.

Utilising other brands

“Keep your friends close, but your enemies closer”. This advice has been embraced by the Next leadership and is embodied in their LABEL offering, which sells hundreds of third-party brands through the Next website. Next customers can order products from brands like Ted Baker, Speedo, The North Face and Nike along with their standard Next products. This proposition has seen huge success and, in January 2022, total LABEL sales grew by +69% over the last two years to £865m. Not only does it give Next control over the distribution of their competitors, the hundreds of different brands they sell allows them to massively increase average basket sizes, drive customers in-store to pick up their deliveries and engage a new subset of customers who might never have engaged with the Next brand on its own.

What can we learn?

So, in conclusion, what can a business leader learn from Next and how can they apply it to their own company? Next followed the tried and tested process of CIVD (Customer, Innovation, Value and Delivery):

• Next identified a growing customer need in the e-commerce space.

• They then innovated a high-performance digital experience that fits seamlessly into their customer journey.

• Next then ensured their website would deliver value by driving users into their stores, thus maintaining dominance in high street retail.

• Finally, they then delivered this experience intelligently using next-day-delivery, NextPay and offering third-party-brands.

When combined with the strength of their brand, it isn’t a surprise they continue to thrive despite market challenges.

The CIVD approach is how Manifesto Growth Architects approach every project; we create a bespoke client solution that simultaneously identifies quick wins and delivers long term growth for your business. Want to learn more? Check out our approach here.