Online rules but retailers must focus on service quality

The disruptive force of online retail continues to grow. The UK’s largest players in the market saw a 23% rise in sales last year, according to recent figures.

And with savvy shoppers increasingly turning to their tablet and smartphone, it’s a trend that doesn’t look like slowing any time yet.

Matthew Moulding and John Gallemore

Cheshire-based online health and beauty company The Hut Group (THG) is Europe’s biggest retailer of premium beauty products – including MAC, Bobbi Brown, Estée Lauder and Lancôme – through, and also owns a raft of luxury beauty brands including ESPA, Mio Skincare, Mama Mio, Grow Gorgeous, and Glossybox.

Set up in 2004 by Matthew Moulding and John Gallemore, THG employs more than 3,000 people and is expecting to double that by 2019. It deals across more than 140 websites in 47 languages and 30 currencies and 73% of its sales are overseas.

Group revenues for Manchester-based fashion retailer climbed 100% to £228.2m in the lead up to Christmas, reporting record performance across all its brands in the four months to December 31.

Hailing a strong balance sheet with net cash of £127m, joint chief executives Mahmud Kamani and Carol Kane said:  “The Black Friday period was our most successful ever and we traded well throughout the period under review. boohoo has continued to perform well, delivering strong revenue growth on increasingly challenging comparatives last year.

“Our focus remains on the customer proposition: offering the best range of the latest fashion at affordable prices, coupled with great customer service.”

boohoo group global Distribution and Customer Service Centre, Burnley

The fast-fashion specialist also bought the Manchester-based company trading as last year. This catapulted 21Three Clothing, known as Prettylittlething, to make a £3.3m pre-tax profit from a £1.3m loss following the acquisition of 66% of its share capital. delivered exceptional pre-Christmas results with year on year revenue up 191% to £73.8m while turnover for Nasty Gal stood at £11.9m, increasing month-on-month from its start-up in March 2017.

Finance director at, Paul Papworth, said: “The company enjoys the benefit of plc’s distribution and customer service expertise which ensures its global customer base can be serviced from one UK site.”

Bury-based JD Sports scored impressive results for the year to February 3, as sales and profits both increased. Pre-tax profits, after exceptional charges of £12m, came in 24% ahead at £294.5m, on sales of £3.161bn, which were 33% ahead of 2017.

Like-for-like store sales edged ahead 3% during the 53-week financial period, while like-for-like website sales were more than 30% better than previously. JD’s international expansion continued with a net increase of 56 stores, compared with 54 the previous year, across Europe.

Outdoor EBITDA figues, including a full year of Go Outdoors for the first time, were £23m, up from £7m previously.

Peter Cowgill

JD Sports executive chairman, Peter Cowgill, said:  “This is an excellent result demonstrating our capacity for

continuing growth in both existing and new markets, and the strength of our offer in store and online.

“After delivering a headline profit of £100m for the first time in the year to January 2015, the headline profit has increased by more than £200m over the subsequent three years, a rise in excess of 200%.

“This sustained growth could not have been achieved without a relentless and ongoing focus on a number of key principles which ensure we remain the undisputed consumer destination of choice for sport lifestyle footwear and apparel.”

He added: “The investments we have made over a number of years in developing our multichannel proposition and driving improved buying, merchandising and retail discipline have ultimately led to the creation of a world-class sports fashion business which combines the best of physical and digital retail on an increasingly global scale.

“We are very encouraged by the progress that we are making internationally and we continue to look for further opportunities to bring our dynamic multichannel proposition to new markets around the world with the support of our key brands.”

Tom Marley, founder and managing director of e-retailer The Car Buying Group, sums up the online landscape.

He said: “Without doubt, the online marketplace is becoming more and more crowded and I don’t see that changing in the future.

“Given the rise in e-commerce many businesses that would traditionally conduct business physically are now moving online.

“As this happens, the user base of continues to rise too which means that there is an increasing amount of people looking to make purchases online. So while it is becoming more crowded and more competitive, there’s an ever growing user base which businesses are able to provide a service to.

“In order for a business to differentiate themselves I’d say that service is the key thing. People have a lot of choice about where they buy from and who they deal with. That said, people are prepared to pay a premium for an increased level of service.”

Stephen Robertson

Stephen Robertson is chairman of independent economics research consultancy Retail Economics. He is also a non-executive director of Manchester-headquartered Timpsons and Rochdale-based Footasylum.

Though the online industry is growing, Robertson still sees a need for retailers to have a physical presence – and points to the fact that e-retail giant Amazon is also looking to develop traditional bricks and mortar as it continues to grow.

He says: “Online retailers becoming omni-channel operations. Finding that sweet spot seems to be the future.

“Growth over the last few years has come from ‘click and collect’. Companies that have developed click and collect in-store have found that the customer not only picks up the delivery but makes another purchase.

“It is that rapid evolution of omni- channel retail that is bringing the next generation forward.”

Squire Patton Boggs’ recent retail report also spoke of the growing ‘experience economy’ and its future importance. It concluded that retailers need to offer a more multifunctional, ‘experience-based’ environment in order to inspire, win and retain the loyalty of customers.

Matthew Lewis, the law firm’s head of retail, said: “The question for e-retailers is can they continue to drive growth simply through online or do they need some physical presence?

“Click and collect will have its say, though it may be through smaller and different types of stores.”

Sue Richardson KPMG North head of retail, added: “There are lots of conversations going on around the high street. The fact is people still like to touch and look and see, and get that shop experience.

“Stores are becoming more of a showroom and not necessarily the main place where you go and buy a product.

“Customers are also prepared to pay a decent amount of money to get a really good fulfilment service, delivering to a specific place at a specific time. That is something that retailers need to be really aware of.

“It’s a service element to customers that is actually dependent on logistics firms rather than retailers themselves. How do they ensure that the customers’ relationship is with the retail brand not with the delivery firm?”

Briony Garbett, customer director at national fashion brand Oasis, says the demands of the online consumer continue to change and with it the channels used by retailers.

She said: “Customer expectations are ever evolving. I feel like expectations are getting greater which brings a degree of complexity.

“As we begin to offer more services and functionality, naturally that requires either the use of additional systems or enhancement of existing platforms.

“The most challenging part is making sure all of the systems are well integrated to ensure a smooth customer journey that is easier said than done.

“Also where pure plays and new entries to the market have more agile systems and lack legacy architecture, they have the advantage.”

Read more in the State of the Region series.

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