Next continues to ramp up digital marketing spend as online sales surge
With online sales driving a £4m profit for the retailer during the third quarter, Next plans to increase its investment in digital marketing amid stuttering sales in physical retail.
Next plans to ramp up its investment in digital marketing after full price sales rose by 17% during the third quarter to 30 October, compared to 2019 levels.
During the past five weeks alone Next beat its full price sales forecast by £14m, generating £4m of profit, with sales up 14%.
This success was driven by ecommerce. Online sales of Next branded products rose by 21% during the third quarter and 37% for the year, compared to 2019/2020. Demand was even stronger for third-party brands, with online sales up 86% during the third quarter and 73% for the year.
International online sales increased by 41% during the third quarter to 30 October and 55% for the year. Overall, online sales were up 40% over the third quarter period.
By contrast, Next UK and Ireland retail sales fell by 6.1% over the period and were down 28.8% for the year, compared to 2019/2020.
However, the retailer’s push for full price sales, rather than relying on discounting, appears to be working. Third quarter full price sales were up 18.7% and 12.8% for the year so far.
Next does not expect sales to continue at the levels seen during the third quarter for several reasons, including expectation that pent‐up consumer demand will likely diminish. The brand notes that while stock availability has improved the situation “remains challenging”, with delays across the international supply chain being compounded by labour shortages in the UK transport and warehousing networks.
Next also points to the fact consumer spending on “more discretionary purchases” could be hit over the fourth quarter by price increases for essentials such as fuel.
Next ups online marketing spend as return on investment exceeds expectations
The retailer says the £4m of profit generated during the third quarter will be offset by “further investment in digital marketing” and the increased use of inbound air freight, alongside other online distribution costs. For these reasons, Next is maintaining its fourth quarter full price sales guidance at 10% and full year profit before tax at £800m.
Digital marketing is becoming an important focus for Next. Back in September, the retailer confirmed it had increased its digital advertising spend by £10m in 2021 to £65m.
The business confirmed at the time that it would spend “at least” £100m on online marketing this year, representing its investmnet in both personnel and software. Next claimed digital marketing had “outperformed” expectations, delivering on average around £1 of net cash profit for every £1 invested – well above the 50p return anticipated.
Crediting the role of marketing in driving a 40% increase in its online customer base, the retailer plans to increase its investment in digital marketing by a further £15m in 2022.
This is a far cry from the onset of Covid-19, when the business saved £21m by pausing marketing spend during the first national lockdown in 2020.