With online sales generating a profit of Â£ 4million for the retailer in the third quarter, Next plans to increase its investment in digital marketing amidst jerky sales in physical retail.
Next plans to increase its investment in digital marketing after full-price sales rose 17% in the third quarter to October 30, from 2019 levels.
In the past five weeks alone, Next has exceeded its full-price sales forecast of Â£ 14million, generating a profit of Â£ 4million, with sales up 14%.
This success was driven by electronic commerce. Online sales of Next branded products increased 21% in the third quarter and 37% year-on-year, compared to 2019/2020. Demand was even stronger for third-party brands, with online sales up 86% in the third quarter and 73% year-on-year.
International online sales increased 41% in the third quarter to October 30 and 55% for the year. Overall, online sales increased 40% in the third quarter.
In contrast, Next UK and Ireland retail sales fell 6.1% over the period and 28.8% over the year, compared to 2019/2020.
However, the retailer’s pressure to sell at full price, rather than relying on discounts, seems to be working. Full-price third-quarter sales are up 18.7% and 12.8% for the year so far.
Next does not expect sales to hold steady at levels seen in the third quarter for several reasons, including the expectation that pent-up consumer demand will likely abate. The brand notes that while inventory availability has improved, the situation “remains difficult” as delays in the international supply chain are compounded by labor shortages in transportation and warehousing networks. from the United Kingdom.
Next also highlights the fact that consumer spending on “more discretionary buying” could be affected in the fourth quarter by price increases for essential products such as fuel.
Upcoming Online Marketing Spend Because ROI Exceeds Expectations
The retailer says the Â£ 4million in profit generated in the third quarter will be offset by “further investment in digital marketing” and increased use of inbound air freight, as well as other online distribution costs. For these reasons, Next is maintaining its full-price fourth quarter sales forecast at 10% and its annual pre-tax profit at Â£ 800million.
Digital marketing is becoming an important goal for Next. In September, the retailer confirmed that it had increased its digital ad spend from Â£ 10million in 2021 to Â£ 65million.
The company confirmed at the time that it would spend “at least” Â£ 100million on online marketing this year, which represents its investment in staff and software. Next claimed that digital marketing had ‘outperformed’ expectations, on average generating around Â£ 1 in net cash profit for every Â£ 1 invested, well above the expected 50 pence return.
Crediting marketing’s role in increasing its online customer base by 40%, the retailer plans to increase its investment in digital marketing of an additional Â£ 15million in 2022.
We are a long way from the start of Covid-19, when the company saved Â£ 21million by suspending marketing spending during the first nationwide lockdown in 2020.