What lies ‘Next’ for the traditional High Street?

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Fashion and furniture chain, Next plc, is one of the retailing bright spots to be found in some of our beleaguered town centres.

At the half way point in the year, the company has posted a 4 per cent increase in sales and a similar growth in pre-tax profits. It continues to be the ‘steady Eddie’ of the high street.

Digging down into the figures reveals that its on-line turnover, at just over £1 billion, is now out-performing its in-store sales - by a considerable amount.

This confirms that the physical stores are now working for the on-line division, rather than vice-versa.

Significantly, sales at ‘full price’ continue to grow as a percentage of all sales - increasing gross margins and providing clear evidence that the company is stocking the right products at the right price at the right time.

So what does Next plc believe the future to be for its portfolio of high street stores?

As part of its recently published results for the six months to July 27, the company has added the following interesting paragraph with the heading: “The role of retail shops in an on-line world.”

It states: “In terms of Retail stores, the situation is not quite as one way as it might at first appear.

“Fifty percent of on-line orders are delivered to our stores.

“For some customers, home delivery is inconvenient; others prefer to avoid the cost of home deliveries.

“Returns are a central part of our on-line service and 82 per cent of all returns come back through our stores.

“It is counter-intuitive, but the fact is stores have now become an important part of our on-line service.”

In a further noteworthy comment, Next plc also states that: “The rents we are paying for our properties are way out of kilter with the value they provide as collection and returns centres, so if stores are to remain open, retail rents must fall and fortunately, that is exactly what they are doing.”

There is hope, therefore, that many of the more successful retailers may not abandon the high street altogether.

Following the publication of its results, Next’s Chief Executive, Simon Wolfson, confirmed that the decline in its bricks and mortar shops “hasn’t been nearly as bad as we thought.”

For town centre retailers across the board Wolfson’s comments should bring new hope.

The future may have to be somewhat different, but at least it should be brighter.