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Is Next the model for online retail? – Fidelity International

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Published 23 September 2021
Fidelity International

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Next (NXT) appears to be stealthily building its empire in a way that clearly uses lessons learned from its mail order past, but with a tech twist that brings it into the 21st century.
Its latest joint venture, announced just days ago, with flagging fashion brand Gap, will see Next managing Gap’s UK website. It will also mean Gap, which announced in July that it was pulling all 81 of its physical stores out of the UK, retains some high street presence here, with its merchandise in Next’s stores.
This latest deal is not unlike the one Next signed with clothing brand Reiss a little earlier this year and it too pivots around Next’s “Total” platform, built to handle the e-commerce side of other fashion brands’ business.
It’s a clever set-up, allowing fashion brands to retain creative control of their websites and keep their brand alive online, while all back-end operations are run by Next’s distribution centres and call centres. Next will own 51% of the new venture, Gap retains 49%.
These deals highlight the continuing shift online for retailers and, probably more importantly, the need to move swiftly. Next moved into mail order retailing back in 1986 when it bought Grattan’s, then launched Next Directory two years later. Alongside its “One brand; two ways of shopping” strategy in 1993 it was the first true cross retail and home shopping format.
Next has earned its stripes and this has been proven by its pandemic performance. When it struck and consumers were locked down, the retailer was one of the first to turbo-charge its online shopping offering and it was soon evident that its resilience was in sharp contrast to many of its retail rivals.
Next’s online presence is its definite strength. Despite the fact its near-500 shops were shut for a significant proportion of its year to January 2021, group sales only decreased by less than 17% and Next is confident that current profits are on course to recover to pre-Covid levels of around £700 million in the current year.
Investors have been richly rewarded, with the group’s shares hitting an all-time-high after it revealed online sales had surged more than 60% higher than in 2019, making it the UK’s biggest internet clothing retailer – ahead of rivals like Asos and Boohoo. They have also been rewarded with a special shareholder pay outs from its “surplus” cash pile.
Next’s first-half results are due out on Wednesday.
More on Next (NXT)
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