Dunelm makes multichannel investment a priority

Homewares retailer Dunelm is set to focus on multichannel development in the coming months, with the percentage of sales made through its digital platforms continuing to grow, in keeping with current retailing trends.

The re-platforming of its website is expected to be ready for the start of the company's next financial year, which begins in July, with this development anticipated to enhance the front end customer journey and allow the business to roll out future website developments over shorter lead-times.

During the retailer's half-year trading update, published on Tuesday, it was also stated that complementary investments will be made to key back-end processes such as customer service and handling systems that the business hopes will improve the cross-channel experience for customers.

Dunelm estimates that the total investment associated with this series of developments is expected to be approximately £7 million, of which £2 million had already been incurred by the end of 2013. This is slightly up on previous cost predictions, but the new site will offer customers more interactive features such as videos and personalisation options.

Nick Wharton, CEO of Dunelm, commented: "Enhancing our online offer and extending our multichannel presence allows our customers to shop at Dunelm how and when they wish, extends our geographic reach and creates our biggest shop window, allowing our ranges to be viewed and researched by new and existing customers.

"Customer preference for this shopping experience is clear with over 26 million visits to www.dunelm.com during the period and online sales growing by over 50% year on year to represent approximately 6% of revenues in the second quarter. Further profitable expansion of our multichannel operation is therefore an investment priority."

The 26 weeks to 28 December saw like-for-like sales at Dunelm dip 0.9% compared to the same period last year, although revenue in the second quarter of the financial year, which included the busy Christmas period, was up 2.9%. Profit before tax was up 2.9% to £61.6 million.

Wharton acknowledged the introduction of the retailer's new specialist fulfilment facility during the final quarter of 2013, saying it has "materially improved speed and choice within our home delivery offering" and suggested the new hub is "scalable for our multichannel ambition".

The West Midlands-based operation, which is run by supply chain solutions provider iForce, is home to approximately 14,500 SKUs. It strengthens Dunelm's capacity to offer next-day delivery and it also allowed the business to trade online far closer to Christmas than before.

As part of the multichannel infrastructure investment, the reporting period also saw Dunelm strengthen its Reserve & Collect (R&C) and home delivery propositions. The company's R&C offering links store stock files to the web, in real time, which enables customers to check availability of products in local stores and then reserve them.

"[It's] the most profitable element of multichannel and importantly represents approximately a third of our multichannel revenues," explained Wharton.

"To further enhance convenience, the lead time between order and collection has been reduced to three hours."

Dunelm made key upgrades to its core SAP systems platform and its in-store point of sale system during 2013, which the company said has improved stock control and made in-store processes more efficient. The addition of further central warehousing capacity is also in the pipeline, with the business expecting to commence this work at some stage in the next financial year.

Growth is not restricted to the digital world, however, and the retailer still has plans to expand its store portfolio to approximately 200. After opening six superstores in the period, including the relocation of one store, the group ended the period with 131 superstores and nine high street shops in total.

Greg Bromley, retail consultant at industry analyst firm Conlumino, told Essential Retail: "Dunelm must be commended for the way it has leveraged multichannel to its advantage; both to better promote its products and brand, but also to extend its reach to many areas of the south-east where it still has little physical coverage.

"However, its website is also fairly basic and lacking in aspirational feel, so a new platform should help it improve growth in this area even further."

The social media space is another area of development Dunelm may consider as it focuses its attention on becoming truly multichannel. According to eDigitalResearch, the retailer has an opportunity to build its presence on Facebook and Twitter, et al, while it re-platforms its website.

"Dunelm currently sits in the middle of the Facebook league table in our Retail Social Media Benchmark and are one of the top performing home ware brands, beating the likes of The Range and Wilkinson," explained DigitalResearch commercial director Derek Eccleston.

"It is already encouraging social customers to get in touch via its dedicated customer contact Twitter account, but could do more to engage with users and encourage social conversations – we’ve always found that the retailers who succeed the most on social media sites are often the ones that get users talking and integrate activity.

"Features such as encouraging online customers to share their purchases, offering followers exclusive offers and competitions and even investing in sponsored stories will all help Dunelm to grow its social presence."