Debenhams pays the price for "nebulous" digital retail thinking

The British have one source of small talk in common - the weather. So it seems do retailers. We’ve heard time and again of the impact of hurricane season on U.S. retailers. Now we’ve got Debenhams blaming an 85% year-on-year drop in profits on the Beast from the East!

There’s another possible explanation for the UK retail chain handing in another set of dire numbers. As CEO Sergio Bucher admits:

Our product hasn’t been good enough. We are on a mission to fix it.

Or rather, still on a mission to fix it, as Bucher, drafted in from Amazon on a ‘can’t beat them, poach people from them’ basis, has now been steering the ship for enough time to start to see results coming in. As it is, his digital background is appropriate as that’s the only growth area - UK store business is down 6% year-on-year, while digital sales are up 8%.

But that’s not enough to avoid Bucher having to start spinning what’s still a dreadful performance by one of the UK’s best known retail brands:

A year ago, we unveiled an exciting and ambitious new strategy, which was designed to put Debenhams in a position to succeed in the retail industry undergoing profound change. A year on, the change has been more rapid and more profound that anyone expected. This means we must accelerate the pace of change in our business.

So far, so blah-blah. What’s the skinny on the strategy? Bucher says:

We want to be the leader in Social Shopping. Shopping as a fun leisure activity, enjoyed with friends or family, shared on social media and wrapped in a mobile experience. We’ll deliver growth by becoming a destination with digital at the center of everything we do, and taking a different approach to how we manage our business.

A hefty hunk of that is going to be digitally—focused, he argues, pitching the line that digital sales are up 13% on two year ago. And there are plans in place to grow faster than retail rivals, he adds:

I know that because of my background, many…expect me to bring more digital thinking into Debenhams and this is precisely what we’re doing with our website, of course, but also a duty, where digital will be at the core of our new strategy. Our first priority is to scale work we have done in digital to grow faster than the market. We are now focusing not just on functionality, but also the way we present our product and interact with our customers.

Mobile-first

Narrowing this down, it’s all about mobile platforms, Bucher confirms:

All the growth in digital sales continues to be driven by mobile. I talked [before] about the benefits of our partnership with Mobify. We are using its progressive web-app technology in order to step change our customer experience without replacing our existing platform. Using this technology, we speeded up our mobile website by three to four times. Mobile demand has grown by 35% in the first half, supported by double-digit growth in conversion, and we are now heading towards 35% of orders from smartphones, 60% on mobile devices. We had an even stronger response applying Mobify to our Irish and international clients.

We are now applying this technology for tablet users, who account for around 1/4 of our digital sales. And later this year, we roll it out in the desktop as well. This is not just about increasing the speed of design, we’re turning our attention to the search function to make it more flexible and get customers to the product they want faster. Currently, only 60% of our customers get this far, and there is meaningful sales benefits for every percentage point improvement we can deliver.

He points to the recent relaunch of Debenhams Beauty Club as a case in point, citing a 10% increase in its active customer base:

This is the first step in our plan to grow in the large and fragmented beauty services market. Our strategic focus is on driving digital and social interactivity and unifying the channel, so that digital is the core of our strategy. To be honest, over peak, we probably saw more competition from our department store competitors than from online pure players. I think that the core of our strategy really is not just to trade products. Selling product is easy. What’s really important is to be able to create an environment, where you’re able to interact with your customers who are passionate beauty users. They just don’t want to buy something. They want to talk about beauty, they want to share their experience about beauty.

We are currently creating the digital environment that will integrate all the touch points that we have with our customers, our Beauty Club social media and trading. I think that’s going to be a very powerful voice that, because we have a number of key assets. One, we have 1.5 million active users of our Beauty Club. We have 1.5 million followers on our Facebook website, who follow our videos.

We have hundreds of very passionate beauty makeup artists, for example, who work in our stores, who are desperate to create content and interact with our customers. So I think that we have a series of strengths and our responsibility is going to be to create this environment that will strengthen our position as the leader.

But he adds:

I know it might feel a little nebulous right now, but I think that in a few months, we’ll be able to show you what it looks like in action.

My take

Two phrases jump out:

Our product hasn’t been good enough.

And:

Selling product is easy.

One of these, it seems to me, can’t be entirely correct - and that contradiction sums up so much of what’s gone wrong with Debenhams. The digital/mobile focus is all good and well, in theory, but as Bucher admits, it’s all rather nebulous.

Still, last week’s heatwave in the UK ought to be good for a few more months worth of excuses, eh?