Profits surge at Shop Direct as technology investments pay off
September 6, 2016
Shop Direct, the UK’s second largest pureplay digital retailer, generated strong underlying profit before tax (PBT)1 growth in the 53 weeks to 30 June 2016.
The group, which operates digital department stores Very.co.uk, Littlewoods.com, VeryExclusive.co.uk and LittlewoodsIreland.ie, grew underlying PBT by 43.6% to £150.4m and sales by 4.3% to £1.86bn2. The period represented Shop Direct’s first full financial year as a pureplay digital retailer, having ceased catalogue production in January 2015.
The strong underlying PBT increase was driven by 15.9% sales growth at the group’s largest and fastest growing online department store Very.co.uk3, which became a £1bn-plus brand for the first time; expansion in mobile transactions, which now make up 62% of online sales; and continued cost discipline across the business.
Another strong set of results; the fourth consecutive year of sales and profit growth
Underlying PBT growth of 43.6% to £150.4m (2015: £104.7m), with sales up 4.3% to £1.86bn (2015: £1.78bn)
- Very.co.uk delivered sales growth of 15.9% to £1.12bn (2015: £967.8m)
- A record-breaking festive period; sales increased 6% year-on-year for the seven weeks to 25 December 2015
- Black Friday (27 November 2015) was the busiest trading day on record, with orders at Very.co.uk up 65% year-on-year
Mobile-first approach paid off, with 62% of online sales from mobile devices (2015: 56%)
- Web traffic across the Shop Direct sites grew by 12% to reach 1.2m visits per day on average (2015: 1.1m visits per day), with daily traffic from smartphones increasing by 42% to more than 638k visits
- Customer trend toward shopping on the move continued, with orders via smartphones increasing by 46% compared with 2015
- The group added new features including push notifications and touch ID to its 4.5 star-rated MyVery app, which is nearing 1m downloads
The strategy – focusing on Shop Direct’s purpose, to make good things easily accessible to more people – is in full swing and working well
Selling more of customers’ favourite brands
- 150 more famous names were added to Shop Direct’s roster of product brands in 2016, including the likes of Bose, Whistles, Samsonite and Yves Saint Laurent, taking the total to more than 1,300 across clothing, footwear, home, electrical, beauty, seasonal and luxury fashion
- Brand optimisation continued, with customers of Isme.com, Woolworths.co.uk and KandCo.com migrated to give greater focus to Very.co.uk and Littlewoods.com
Big data and technology helped to create one of retail’s most cutting edge, personalised experiences for customers
- Shop Direct continued to build its platform and proprietary technology across data, personalisation, credit decisioning and pricing
- Driven by machine learning, the group is now personalising more customer touchpoints than ever – from customer emails and off-site advertising to homepage content, on-site sort orders, top navigation menus and product recommendations deeper within the shopping journey – and also begun trialling personalised service with the aim of building deeper relationships with customers
- These developments helped Shop Direct to become the first company to win Retail Week’s pureplay etailer of the year award for two years in a row
Continued to invest in unique ways for customers to spread the cost
- The group maintained its continued focus on customer quality, with bad debt in line with the prior year as a percentage of the overall debtor book
- The group has initiated a £50m financial services personalisation programme in partnership with IBM, to create ground-breaking capabilities to give customers financial services products tailored to their specific needs
More to come as Shop Direct backs new own brand and artificial intelligence
Adding even more brands customers will love
- The first full collection for Shop Direct’s new own label brand ‘V by Very’ launched to consumers on 5 September 2016; through the label – which incorporates high quality, design-led lines across womenswear, menswear and childrenswear – the group is targeting accelerated growth in the UK fashion market
- VeryExclusive.co.uk, Shop Direct’s luxury fashion destination, is set to unveil a premium menswear offer in autumn/winter 2016, with brands including Barbour, Kenzo and Aquascutum signed up for launch
Investing further in big data and technology to even better understand and serve customers
- The group is continuing to invest in and test new disruptive technology to further personalise the user experience for customers, including using data, predictive models and artificial intelligence (AI) to build a programmatic and automated customer management engine; this will enable Shop Direct to create an even more personalised customer journey, from more relevant and timely email, SMS, push notifications, social media and on-site communications, to real-time, relevant special offers for each customer
- Shop Direct is also working with IBM Watson to explore AI-driven conversational user interfaces for its MyVery app; technology that will allow customers to talk to Very.co.uk as they would a friend on WhatsApp, and receive personalised messages to make their shopping experience even easier
- The group has built a new senior team to strengthen and accelerate its data-fuelled approach to ecommerce, with Sasha Berson hired from Groupon to join the executive board as group strategy and customer director, Assi Gol brought in from McKinsey & Company as customer intelligence director and Gael Decoudu hired from Vistaprint as head of data science and digital analytics
Alex Baldock, CEO at Shop Direct, said:
“We’re happy to report a fourth consecutive year of sales and profit growth. We’ve stayed focused on our strategy of bringing great products within reach of more people, and it’s working well for us.
“2016 was our first full year as a pureplay etailer. Removing the shackles of the catalogue has been liberating, and has allowed us to invest in the areas that matter most to our customers – making their shopping experience easier and more personalised, particularly on mobile.
“This was the year our investments in technology really started to pay off. We’ve made big strides in m-commerce, big data and personalisation. But there’s a lot more to play for in these areas. In particular, we believe that artificial intelligence can change the game for us in data and personalisation. We’re deploying it already and are serious about going much further.
“We continue to gain market share profitably, and are on course for another record year of sales and profit. We’re confident that, if we stay true to our strategy and to what makes us special, we’ll continue to succeed.”
Shop Direct adopted the full IFRS accounting framework for the first time this period, having previously used the UK GAAP accounting standard; the group’s 2014/15 financial results have therefore been restated under IFRS for the purpose of comparison.
1 Underlying profit before tax calculated as profit before tax, exceptional costs, fair value adjustments and IAS 19 (Employee Benefits)/IFRIC 14 from continuing operations.
2 Shop Direct’s 2015/16 financial year was a 53 week-year. On a 52-week basis, the group’s 2015/16 sales were £1.83bn, an increase of 2.4% compared to the 2014/15 52-week financial year.
3 On a 52-week basis, Very.co.uk’s sales increased by 13.9% compared to the 2014/15 52-week financial year.
Lauren Young 07919 228 622
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ABOUT SHOP DIRECT
Shop Direct is the UK’s second largest pureplay digital retailer, with annual sales of almost £1.9 billion. Our digital department store brands are Very.co.uk, Littlewoods.com, VeryExclusive.co.uk and LittlewoodsIreland.ie. We receive an average of more than 1.2 million website visits every day, with 62% of online sales completed on mobile devices.
We exist to make good things easily accessible to more people. With our department store range of famous brands, market-leading ecommerce and technology capabilities and unique financial services products offering flexible ways to pay, we’re well placed to deliver on that promise.
We sell more than 1,300 famous brands, including big name labels and our own exclusive brands. We have four million customers and deliver 49 million products every year. Our free click and collect service, Collect+, delivers to 5,800 stores across the country, increasing ease and convenience for customers.