Debenhams' fulfilment focus bears fruit

New in-store collection and premium delivery services introduced by Debenhams before Christmas supported a busy end to 2014 for the retailer and they continue to support its increasingly mobile customer base, according to an interim results statement published on Thursday.

The department store chain said that its next-day click & collect offering and the extension of the cut-off time for next-day home delivery to 10pm, as well as evening, weekend and nominated-day deliveries, were put to good use – particularly over the busy Black Friday weekend and Christmas trading period.

Many of these new fulfilment options were put into place from 11 October 2014 as Debenhams prepared for the traditional upturn in trade around the festive season.

A year-on-year profit-before-tax increase of 4.3% to £88.9 million and like-for-like sales growth of 1.3% for the six months to 28 February surpassed market expectations, and CEO Michael Sharp attributed much of this top and bottom-line boost to the investments made to the Debenhams multichannel proposition last year.

"I am pleased with the good progress we have made against the strategic priorities we set out last year," he explained.

"We have improved our multichannel offer and successfully introduced the premium delivery options that we promised for the important peak period, which met with a positive response from our customers. The continued refocusing of our promotional strategy delivered a strong increase in full-price sales, an improvement in value perception and enabled us to end the half with an improved stock position."

This week's statement from Debenhams said that customers' desire for convenience was a key driver of demand for click & collect, which grew as a method of purchase by 22.1% compared to the same period one year before.

During the crucial festive trading period comprising the four weeks to 10 January 2015, online sales increased by 28.9%, with the new next-day fulfilment services accounting for 49% of orders in the seven days prior to Christmas.

The number of visits to increased by 6.6% to 158 million for the six-month period, which included a 34% increase in visits from mobile devices. Debenhams said that mobile devices now account for 42% of total online sales.

Updates to the web offering continue to be made as it becomes an increasingly important part of the Debenhams sales mix – totalling £271.8 million of the £1.6 billion gross transaction value. Improvements to the look and utilisation of store space – not to mention investment in product design for house brands – also remain high on the retailer's agenda as it continues to try and serve customers across all channels and modernise all parts of its operations.

Online EBITDA increased by 7.1%, which Debenhams said reflected an increased mix to lower margin concession sales, in addition to the investment in premium services. Judging by the wider problems the retail industry is experiencing when it comes to making modern retailing profitable, the department store group will arguably be particularly encouraged by this figure.

Indeed, these half-year results update comes in the week that new research found just 16% of retail and consumer goods company CEOs across the globe admit to being able to fulfil so-called omnichannel demand profitably.

The study, which was prepared by professional services firm PwC for supply chain solutions provider JDA Software, questioned 400 business leaders from Europe, North America, Central America and Australia. Some 67% of respondents reported the cost of fulfilling orders is growing as their companies' increase their focus on selling across multiple channels.

When asked what was the most expensive part of these new strategies, 71% cited handling returns from online and store orders, while 67% and 59% respectively said it was shipping directly to the customer and shipping to the store for customer pick-up.

Evidently for businesses like Debenhams, it will remain a challenge to make money while meeting consumers' new demands.

Kevin Iaquinto, chief marketing officer at JDA, commented: "Having products available, then finding the most profitable way to deliver them are critical activities that lie at the heart of supply chain excellence.

"The CEOs in the JDA survey clearly understand the challenges they have ahead of them with regard to fulfilment, and they know they will have to innovate if they are to be profitable while meeting customer expectations across channels."