Multi-channel investments have proved to be a double-edged sword for Debenhams, as the retailer revealed its stores have suffered because shoppers are moving online.
Debenhams reported a one percent growth in group like-for-like sales in its latest results, driven mainly by online sales. In a breakdown of this growth, it said that UK online sales had increased 2.1 percent, offsetting a 1.99 percent decline in UK stores sales.
“The UK experienced difficult trading conditions during the first half of the year, which were detailed in the interim results, and the performance of the stores continued to be impacted by the channel shift into online,” Debenhams said in its full-year results to 30 August 2014.
Over the last couple of years, the department store focused its capital expenditure on modernising stores. However, the department store said that it spent a large amount of its £128 million capital this year on systems development, “particularly those to support the group’s growing multi-channel and international activities”.
Investments Debenhams has made in 2014 include a “visual refresh” of its website, and it said that it had removed customer “pain points” in the checkout and returns processes. Further, the retailer said that its single customer view is now fully operational, which is “driving greater returns from customer relationship management programmes”.
As retailers try to close the lead time between a customer ordering an item online and it reaching the customer, Debenhams has also invested in supply chain efficiency to enable it to introduce new delivery options.
These new options, which were launched “on time” on 11 October, include next day click and collect, an extension to the cut-off time for next day delivery to home from 2pm to 10pm, evening and weekend deliveries and nominated day deliveries.
The importance of click and collect as a delivery method was highlighted as these made up 22.3 percent of all online orders, a three-fold increase from 7.4 percent last year. Earlier this year, the company said it was increasing automation in its distribution centres to reduce the per unit cost of fulfilling online orders.
Michael Sharp, chief executive of Debenhams, said: “Developing a more convenient and competitive online fulfilment offer has been a key priority and we enter this year’s peak trading period [Christmas] with a much improved range of delivery options. We expect further benefits to accrue from these priorities going forward.”
As a result of these multi-channel improvements, Debenhams reported a 17.6 percent increase in online sales to £430.7 million, which represented 15.3 percent of group total sales in 2014, up from 13.2 percent last year.
The number of visits to Debenhams.com also increased by 15 percent to 276 million, including a 58 percent increase in visits from mobile devices. In addition, mobile represents 38 percent of online sales.
Despite the strong online performance, Debenhams’ UK operating profit for the year fell by 24.3 percent to £96.3 million, which the company blamed on lower than expected sales in the period before last Christmas and the costs of a move to a new London head office.