The retail apocalypse continued this week with the news that Debenhams, one of the UK’s oldest high street institutions, is looking at closing nearly a third of its stores after turning in the worst annual loss in its 240-year history.
The firm crashed to a pre-tax loss of £492 million on revenues of £2.9 billion, a collapse driven by one-off charges, including circa £80 million on legacy IT write-offs. With Christmas approaching, it’s not a pretty picture, but it’s not all doom-and-gloom.
While sales in stores open more than a year were down 2.3%, online sales grew 12.3%, meaning around a fifth of Debenhams sales are now online, a success given that one of the four strategic priorities outlined by the firm last year was to exceed the market in terms of digital growth. Of that 20% of total revenues online, click-and-collect makes up 30%, while mobile accounts for 50%. Smartphone conversion rates are up 17% year-on-year.
That’s enough to allow CEO Sergio Bucher to claim:
We see signs that our transformation is gaining traction with growth in digital…We’ve been working hard over the past six months and the results of these efforts are starting to land now.
It’s vindication of the firm’s efforts to roll out a new online platform, built on Mobify. That started last year with the October 2017 roll out of a Progressive Web App for mobile devices. What’s a Progressive Web App? According to the Mobify definition:
Progressive Web Apps, or PWAs, are technically not apps at all but websites that bring speed, interactivity, and many of the features commonly associated with a downloaded or native app to the web. Because it is a website, a PWA can be found by search engines, reaching millions of potential customers, without requiring any action other than opening a website. Google has championed PWAs with all of the browser providers including Chrome, Firefox, Opera & Android OS now fully supporting PWAs. Apple iOS users benefit from the speed and engagement features of PWAs and Apple recently indicated iOS Safari will support additional features.
The main benefit is speed and convenience. With the Debenhams PWA, a shopper can go right to the Debenhams site and start browsing with his or her mobile phone. Shoppers can buy a product in just a few quick taps, without downloading an app or checking for updates. Studies show that the web shopping experience must be fast and app-like or the customer may move on to other things. The new mobile site has more than doubled the speed of Debenhams’ previous mobile site, with typical shopper journeys now requiring less than half the time.
The new platform was rolled out to tablet devices earlier this year, with plans to complete the implementation on desktops early next year. Bucher explains:
Looking forward, we are focusing on a number of initiatives that are still in momentum. With a continuing focus on customer experience, we will roll out out the same improvements we have on mobile to desktop. This will allow us to finalise the separation of our customer experience layer from the underlying legacy platform, allowing us to upgrade it progressively, with neither the cost nor the risk of a major re-platforming exercise. We’re also moving to ranging products for newness to land on our website first.
Debenhams has also recently launched the BeautyClub Community, a social forum which currently boasts 1.3 million members. Bucher says:
The Beauty Club will allow us to establish a new, more profound relationship with our customers and bring our Beauty Club loyalty program into the digital age. We have not invented this idea. It was already launched very successfully in the US by a French speciality chain [L’Oreal]. According to our technology partner, ours is the fastest growing community of the 500 that they have launched in the world.
It’s still very early days, but since the launch we have had over 200,000 unique visitors. That’s 28% ahead of our target. One third of the sign-ups are actually new to Debenhams. As well as being a source of free traffic to our website, more than £200,000 of revenue can be attributed to the community. Also community shoppers are higher spending, higher value customers than the rest. We now estimate that this is an investment that will deliver return in less than one year.
The next step here is using that improved enagement with customers to tap into data in order to better personalize and customize outreach. Bucher admits:
Online, our legacy platform did not have enough functionality to allow us to customize content and communications with our customers. We are now rolling out our Mobify platform on desktop. Once we implement Mobify across all channels, we will be in a position to make progress and address those issues.
The other big push going forward is encouraging more use of click-and-collect, says Bucher:
It’s an area that we are very focused on. Our goal with delivery charges is to make sure that our most profitable method, which is click-and-collect, becomes the favourite option for our customers. One, because it’s the most profitable method; two, because it gets customers to our stores. And 24% of customers who click-and-collect also spend more money.
Of course, with potentially 50 fewer stores, click-and-collect might actually become somewhat less convenient for a lot of customers, but Bucher says that the firm is looking into new collection opportunities.
While he insists that Debenhams continues to see the high street store as a critical part of the retail model, there are macro-economic factors that make life difficult, not least rents and business rates. It’s rumoured that UK Chancellor of the Exchequer plans to address this issue in next week’s Budget statement, something it seems Bucher would be keen to see as a way of levelling the playing field with online retailers who can operate out of less expensive locations:
We will anxiously wait to hear what the Chancellor says that he is doing…what is clear now is that we are paying £80 million of business rates every year and it’s going up. Compare that to our profit before tax. When our online competitors are in a preferential situation, it definitely seems that it’s something that government should tackle.
It is, once again, a question of striking that elusive right mix between online and offline. Debenhams is focusing a lot on digital, albeit starting from an arguably neglected base, and that’s all to the good. The Mobify rollout is clearly delivering return on investment. But the real estate legacy remains as much of an issue as the legacy IT that’s being written off
Bucher was poached from Amazon to the CEO role at Debenhams, so the online retail understanding is in situ. The big question is whether he’s going to be given the time necessary to save this 240 year old retail giant from an ignoble end?
Image credit – Debenhams