Is NEXT still relevant?

Since moving to Swindon in late-October, I can bet my friends and family would describe me as going a bit 'furniture mad'. I've been scouring every furniture site, warehouse, store for not only the best deals, but my perfect piece of furniture.

I used to sell sofas in NEXT during my first couple of years at university and lust over the beautiful sofas and perfectly matching furniture sets that were bang on-trend. Every colour, pattern, handle or design was so carefully thought out and I used to spend every 4-8pm shift on a Friday planning out my dream lounge or bedroom.

Finally, I have that dream flat! Furniture shopping has become my addiction and therefore I have spent a lot of time in NEXT stores searching for the perfect piece. However, after finding some great pieces, I never ended up actually going through with any of the purchases. I found almost all of NEXT's furniture products cheaper online. There were almost identical items for over half the price- I was not prepared to pay double for a brand name that I wouldn't have even been proud of owning.

One may argue, that although NEXT do not compete on price, they have a range of added-value benefits including fantastic distribution networks (you can click & collect before midnight the day before), great customer service (I remember giving someone a refund on a rug they bought 2 years before) and convenient locations (drive up, pick up). I agree these are fantastic benefits which the customer can see the real value in and perhaps why they can still act as a semi-premium retailer. However, I don't know if customers are really willing to pay double the price.

Not premium or value

There's no argument- NEXT's quality in terms of manufacturing and materials is unmatchable to other retailers on their scale. For such a huge retailer, their products do have that 'personal', do I dare say 'home-made' feel to them. It is evident that they beat the likes of The Range or IKEA when it comes to intricate and careful designs, however NEXT are not on a par with ultra-quality stores such as John Lewis or House of Fraser who have less stores, yet serve more carefully selected items from well-known, luxury brands.

I feel as though constantly acting as the 'middle' guy can be a win in some cases, NEXT for me is for the families who want to tap in to the luxury lifestyles, but aren't quite at the bespoke or tailored levels. However, not really defining your market could also be a real hindrance for NEXT as they are a reachable brand for most, yet I'm not sure how many of us would consider them as a treat if there is no real perceived product satisfaction, i.e. I was just as happy buying my mirrored dressing table from a never-heard-of online retalier than I would have been from NEXT, however had it been John Lewis I might have thought differently.

Discontinuing ranges

Another factor that deterred me from investing in furniture from NEXT, especially having had worked there, was there continual range refreshes. I know how fast paced their ranges are, not just furniture but clothing and accessories too. As I wanted to buy a couple of pieces at a time, I was relunctant to buy from NEXT for fear that the same range may have been discontinued the next month. Online, there is less of a fear due to the level of stock they can actually carry, due to the fact most of the businesses are literally- a warehouse and an office.

Price Promotions

NEXT don't ever do short-term reductions on their products. Other than 'buy two products, get £20 off each' which, as I said earlier, I was not in a position to do. I am a sucker for a reduction, no matter how small and if I see an item with 20% off it is usually the final push for me to click 'buy'. I know I am totally falling for marketing all of the time!

The infamous sale

Finally, one of the reasons I believe NEXT are irrelevant to me, as a consumer, is the fact I know that all of their products will be half price in 4 or 5 months time. It's the classic story of £100 on Christmas Eve, £10 on Boxing Day. I know this can happen with every retailer, but the face that NEXT places so much emphasis on their sales makes me think "Do I really want this enough to warrant not waiting for the sale? The answer is usually no.


I've placed the context of this blog post entirely on NEXT's furniture offering, however I believe it also applies to their clothing too. I am lacking a clear viewpoint of what they can offer me in exchange for hiked-up prices, a lack of confidence in the brand and a determination to get a better deal.

Why you may be paying way more for your coffee or your train.... (unique target pricing)

Recently, I saw a controversy on facebook regarding thetrainline.com’s use of cookies in determining ticket prices online. This meant they were using consumer’s browser history in order to determine train prices and charge a premium price to customers who had used the service before or those who were frequent users of the website. Clearly when consumers found out there was an outrage and a number of disappointed posts on their facebook and website pages. I feel as though their public relations department dealt terribly with the situation- not issuing a formal apology and even DELETING negative posts. However, I am not concerned with the public relations in this case (see previous blog post), yet the fact that as this has just come to light- consumers are astonished to find this kind of technology in place. Yet it has been used SO many times before, not just online.

 

This sort of exploitation is called ‘unique target’ pricing strategy also referred to as ‘first degree pricing discrimination’ and uses simple economics. Amazon hit the spotlight for using the method a number of years ago, when two customers were charged different prices for the same products when based on their previous purchases. However when cookies were deleted the prices dropped and once consumers realised this there was an outcry, which resulted in Amazon having to change their pricing strategy and stop using the ‘unique target’ approach.

Yet, outside of the online retailers world this careful analysis of a unique customer who is willing to pay a higher premium on a product is in action constantly. A good salesperson can put a higher premium on a car or a house, simply by analysis their customer and determining the price they are prepared to pay for it. Think of when you go to buy a coffee at starbucks for example, a cappuccino might cost you £3 or a hot chocolate £3.20, yet a caffé mocha for £3.40 is just mixing the two together. You can then increase the sizes for an extra 50p, or add caramel for an extra 30p etc.

The fact is- the cost to add extra chocolate powder, caramel sauce or a bigger cup is very minimal is terms of Starbuck’s variable costs, maybe a few pence- yet the higher mark-up transferred to the customer is considerably more. This reflects the fact that people who are willing to pay more for their cup of coffee will choose these extras to bump up the cost- rather than those who are looking for a budget drink who choose to pay for the bare minimum product.

Another example is tickets- OAP’s and children are usually charged less for certain tickets, not because the services provided to them cost any less. They take up the same amount of room on a bus or at a football match for example, yet offering different prices to members of these distinct groups seems reasonable? This is due to the price-sensitivity of the individual members of these groups. Adults are prepared to pay more for their tickets, as stereotypically they have a larger disposable income.

Clearly, this strategy relies on collecting a lot of information about potential customers and isn’t popular with customers who realise it is being used, yet due to the increase in the development of new technologies, it is becoming increasingly popular and provides companies with an easy way to target a number of target audiences and obtain higher profits.

A fab book which goes in to this in a lot more detail is “The undercover economist” by Tim Harford- a must read for any business student.