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Results focus: How Next’s investment in online warehousing paid off in 2020

Next, which released its year-end results today, says that a focus on its online warehouse capacity during 2020 helped it cope with the challenges that a growth in online sales, as well as the impact of social distancing rules in its sites, created during the pandemic.

The company has invested around £100 million over the last two years on capital projects to improve storage capacity and throughput within its warehouse network. These have included a new automated storage and retrieval system for boxed returns, as well as additional online packing capacity.

Space and staff were reallocated from stores to support online during the pandemic, with store staff supporting simple warehouse activities at peak times. Moving its delivery promise from next day to 48 hours also allowed it to maximise output in the early hours of the day, Next admitted.

Next expects to further increase picking capacity this year in its main boxed warehouse. It is currently fitting out a new boxed warehouse (Elmsall 3) which was granted planning permission in September 2020. The warehouse is expected to be operational in the second half of 2023/24, with the first phase providing a further +60% increase in boxed unit throughput compared to current levels. Automation in the new warehouse means Next expects the labour cost of online boxed picking to be 45% lower in Elmsall 3 than in the year to January 2020.

Lower returns

The retailer also said it had seen much lower returns rates during lockdown thanks to the switch in what customers were ordering, as well as customers being more selective at point of order. However it says it expects returns to revert to more normal levels once the pandemic is over.

Before the pandemic online customers collected nearly 50% of their orders and returned over 80% of returns through stores and Next has been allowing stores, when open, to take on some of the simpler returns processing and basic packing work to ease the pressure. It said this has proved particularly valuable at peak times.

Total Platform expansion

Next also updated on its Total Platform offer which allows other brands to use Next’s online infrastructure to manage sales and distribution as a pay-as-you-go platform for online businesses.

The company now has contracts in place for five clients, Childsplay Clothing and Laura Ashley which are already live; Victoria’s Secret UK which will launch in May; a new fashion brand due to launch in September and Reiss which is due to launch in February 2022.

Of these some, such as Laura Ashley, will be serviced by their own branded webpages within the Next website with checkout and deliveries visibly handled by Next and goods arriving in Next packaging.

Others, such as Reiss will have separate branding that means the customer doesn’t realise that Next is involved.

Its Platform Plus model meanwhile allows customers to order items stocked in partners warehouses. Delivered by Next items are collected from such warehouses and delivered with other items in the same order.

Direct Despatch items are despatched directly to the customer by third party brands through their own carrier networks. However Next said that this year some of its “most important” Direct Despatch furniture brands will switch to dispatching directly using Next’s two-man delivery fleet, reducing costs for suppliers and giving it greater control over service levels as a result. It said it expects this area of the business to continue to see strong growth with sales to the year January 2022 expected to be around £110million, up +64% on this year.

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