Retailers as tech firms: Next, The Very Group and others see power in the platform

There is a retail trend under way, whereby traditional purveyors of goods to consumers are now creating tech-led services for fellow industry players.

As is the case with many new trends, clothing and accessories retailer Next is among those involved and able to explain in the clearest manner what is happening.

Next is one of several retailers that are now utilising their respective technology investments and subsequent expertise in IT to help support the digital aspirations of other businesses in the sector.

Through its Total Platform, Next offers client brands a suite of online services, including website, warehousing, distribution, contact centre and distribution network capabilities, to prop up the digital retailing aspirations of third parties – and provide Next with an additional revenue stream in the process.

As Next described in its half-year trading update at the end of September: “The aim is to liberate brands from capital hungry, complex and time-consuming activities, in which they have little competitive advantage.” Investing in the Next Total Platform, it added, allows clients “to focus on the areas where they add the most value – the design, buying and marketing of their brand”.

In essence, the industry is splitting into pure retailers and those, such as Next, which see themselves as more than that.

In 2022, Gap and Reiss – the latter of which Next invested a 25% stake in earlier this year – will join the Total Platform, adding to Childsplay Clothing, Laura Ashley, Victoria’s Secret, and Aubin which have all made that move over the past 14 months.

The Reiss partnership will “materially increase” the Total Platform’s capabilities, according to Next, as it will provide the upmarket fashion business with services such as delivery to wholesale customers, concession partners and overseas retail stores, along with a suite of tax and import functionality, including bonded UK warehousing.

Next is flexing its tech and infrastructure muscles to support smaller businesses as well as its own growth ambitions.

Emily Salter, senior analyst at industry intelligence group GlobalData, says: “Next is normally ahead of the curve so it’s obviously spotted an opportunity to diversify away from retail. If the last year has taught retailers anything, [diversification] is a good thing to learn.”

She calls Next “a leader in the online market” and compares the business to an e-commerce pureplay based on its digital growth in the past two years. Salter is therefore not surprised Next has made this move to become a platform provider.

Traditional retailers are all looking for ways to futureproof their propositions and be present in consumers’ lives in multiple ways, she notes, adding that John Lewis has done this by moving into finance with the launch of an investment service with digital wealth management company Nutmeg.

“Next is one of the first traditional retailers to have a massive third-party offering,” Salter says, explaining that Next itself and multiple brands have gained value from the advent of the Next Label business, a type of marketplace run by Next containing products from other fashion brands such as Levi’s, Ralph Lauren and Ted Baker.

Next may be developing a distinctive proposition, but it is not the only retailer to branch out into technology provision in recent times.

B2B retail tech

If you count Amazon as a tech company that happens to be in retail, as some analysts do, it arguably leaves Ocado and Farfetch as the European retail pioneers in developing tech platforms to aid third parties in their sectors. THG, too, has experienced significant growth by doing likewise in recent years through its Ingenuity platform.

Via use of these three retailers’ technology stacks, grocers around the world, luxury fashion players, and consumer brands, respectively, can increase their fulfilment capabilities or drive improvements in their e-commerce and/or in-store operations.

For example, as part of Farfetch’s wider digital platform offering, which includes its general online marketplace offering, resides Farfetch Platform Solutions (FPS). This option is taken up by companies such as Gucci and Harrods, allowing them to use tried and trusted e-commerce technology to build and develop their own online businesses.

José Neves, founder, chairman and CEO of Farfetch, said during a positive third-quarter results announcement in November there is “strong industry traction behind our platform strategy”.

“Over 1,400 brands and retailers are not only listing more luxury products than ever, but also driving record media solutions revenue in recognition of our highly valuable customers,” he said.

“And with accelerating interest in our Luxury New Retail vision, FPS is shaping up to revolutionise the digitisation of the luxury experience and unlock significant potential for Farfetch.”

Increasingly, retailers are creating new tech-enabled platforms to help support smaller businesses in their fields, while driving new revenue streams for themselves. On similar lines, Tesco and Boots have built out new-look retail media offerings in recent months, allowing brands to more sophistically target shoppers via the retailers’ digital properties.

Meanwhile, Halfords has now entered the software market, with the launch of a field service management product called Avayler. The new business division allows motor parts and repair companies to use Halfords’ proprietary software to streamline their services.

The software was originally developed to manage Halfords’ own garages, mobile vans and retail stores in the UK, and it brings together systems and services developed in-house by the bike and auto parts retailer.

North America-based tyre supplier American Tire Distributors (ATD) was Halfords’ first Avayler customer, and it uses the technology to underpin its business supplying tyres to 80,000 garages across the US.

The product uses algorithms to calculate the available time slots for the customer according to where the nearest van is located and the parts available. It then uses dynamic pricing to value those slots accurately, with the consumer able to track where the van is and receive notifications and updates while the service provider is en route.

Halfords kick-started plans to grow its business-to-business (B2B) division in 2019, including providing auto services to company fleets. Last year, B2B division income grew by 78% compared to the previous financial year, accounting for 20% of group revenue.

With launches such as Avayler that B2B revenue figure is expected to expand further in the coming years.

CEO Graham Stapleton described the Avayler unveiling as a “historic moment” for the business and “another major milestone in our transition to become a market-leading motoring services focused business”.

Stapleton views the technology as a way of helping expand the Halfords business at home and internationally, and it is further evidence that successful modern retail at the largest scale is so much more than just selling products.

Fulfilment technology in focus

The aforementioned Farfetch went a step further with its platform strategy in November, announcing a 50/50 joint venture (JV) with UK-based logistics firm Clipper.

Expected to launch in early 2022, the JV will deliver online orders for luxury goods across Europe, Asia and North America. The two companies think that a dedicated fulfilment service is required for luxury goods, partly due to the high-value products associated with the sector.

It represents one of several major developments in retail industry fulfilment infrastructure this quarter, with online retailer Very.co.uk launching a stockless fulfilment model with major sports brands Adidas and Reebok.

The move doubled the number of products from these brands available to Very customers. The integration means some products will be shipped directly to Very customers from Adidas and Reebok, as opposed to solely from Very’s distribution centre.

And as Very looks to grow this option for other partner brands some sophisticated technology deployment will be required.

It would involve implementing new in-house technology platforms, integrated with external systems such as Oracle Retail Merchandising Cloud Service and IBM’s Sterling Order Management. These platforms are built on an open application programming interface (API) integration framework, which Very says brings improved interoperability across the technology estate, allowing the company to build out this new strategy.

Very intends to scale up the stockless fulfilment model over the next few months to cover brands such as Quiz, Lacoste, Kickers, Berghaus, Speedo and Ann Summers. It gives Very greater choice in selecting the most efficient fulfilment method for the end consumer.

Matt Grest, CIO at Very parent The Very Group, says: “Putting technology at the heart of our business allows us to move fast, follow market trends and pivot when needed to provide brilliant experiences for our customers and our people. 

“The recent launch of our stockless fulfilment model with Adidas and Reebok, which doubled the number of products from those brands available to our customers overnight, is a great example of a retail initiative underpinned by tech. The flexibility of our tech platform means we can easily replicate the model with other brand partners.

“Using tech in this way benefits Very and our brand partners. Already the model is demonstrating how it can drive sales and add customer value.”

Commenting more widely on the need to keep up with retail industry trends, Grest continues: “The pandemic saw more people shop online and brands realise now, more than ever, that having effective online sales and distribution channels is vital.”

The Very Group plans to continue investing in its tech stack, data analytics capabilities and, “most importantly”, according to Grest, the digital customer experience. Doing this, he says, will help the company stand out to both consumers and third-party brands.

Salter says creating tech platforms for third parties to use will clearly not be for all retailers – there will be a limit to those who can do so – but for Next, which has experienced significant growth through its Label business, it was “a logical next step”.

She adds it is “too early” to tell how successful the Next Total Platform will be for third parties, but Gap’s decision to close stores in the UK and team up with Next online “shows the potential power of the platform”.

“There’s only so much a retailer can diversify its product offering, so diversification from retail [into tech services] provides another level of protection [from consumer headwinds],” Salter says. “If retailers can use any of their existing knowledge and technology to diversify, it’s always a good thing.”