Clothing retailer Next almost doubled its digital marketing spend last year and plans to hike it again this year after it delivered “higher than expected” returns.
Next spent £36m on digital marketing in the year to January 2019, up from £19m a year earlier, and it told shareholders that it plans to increase spend “by at least 28%” to £46m in the current financial year.
“The returns achieved on digital marketing have been higher than expected and particularly strong overseas, where we have struggled to make a return in the past,” the FTSE 100 company said at its annual results this week.
Next said it slashed its investment in “more traditional marketing” to reflect the changing nature of its business as high-street sales kept declining, down 8% year on year, while online revenues increased, up 15% to represent about half of turnover.
Digital now makes up the majority of Next’s marketing spend after a watershed year when the company halved expenditure on direct mail, print advertising and TV while doubling digital marketing.
Next added that its digital marketing budget is on course to have risen 500% over five years from £8m in the year to January 2016 to £46m in the new financial year to January 2020.
The retailer has successfully turned its long-standing Directory catalogue business into an ecommerce operation but Lord Wolfson, the chief executive, admitted Next has been slow to change its marketing and website operations.
“Three years ago, we described the extent to which our online marketing and website systems had fallen behind the best in our sector,” he said.
“Since that time, we have responded vigorously and made significant progress in bringing our website, marketing capabilities and other online systems up to date with new technology.”
He claimed that Next’s online systems are now better than many smaller retailers, even though “we still have much to learn”.
The company plans to focus on personalisation and a new search engine to improve the online user experience.
Mobile is increasing in importance, accounting for 70% of online customer visits and 55% of online sales.
The budget for investment in online systems is £57m in the coming year, up from £49m in the previous year.
Next is the second FTSE 100 group to report in recent days that it is significantly increasing online adspend after GlaxoSmithKline told shareholders that it delivered a “far higher return” than traditional TV.