Subject: Competitive Strategy Case Study Wolfson looks to leverage Next’s opportunity in ecommerce Earlier this month, Lord Simon Wolfson celebrated two decades in charge of Next in typically low-key fashion; the milestone was barely mentioned inside the retailer’s headquarters near Leicester. When he was appointed chief executive in 2001 aged 33, Wolfson was the youngest person to run a FTSE 100 company. Since then, the company’s market value has tripled, and it has paid out more than £3.6bn in dividends. In January, when Bronek Masojada retires from the helm of insurer Hiscox, Wolfson will become the FTSE100’s longest-serving boss — and unlike Hiscox, Next has remained a FTSE 100 constituent throughout his tenure.   But Hyman, who considers Wolfson “the outstanding retailer in the industry today”, warned against complacency: “We are still in the foothills of ecommerce . . . it’s a big mistake to think that having a decent website is the end of it when it’s just the start.” Wolfson’s signature achievement has been to take a catalogue and credit operation built by his predecessor and turn it into an online powerhouse that was able to ride out the Covid-19 pandemic better than many more store- dependent rivals. In the year to January 2002, what was then known as Next Directory generated sales and finance income of £360m, around a fifth of the group total. In 2020 the equivalent figure was £2.3bn — over half of total sales and achieved without a catalogue in sight. Now, Paul Rossington, co-head of European retail research at HSBC, points to three initiatives — overseas expansion, the Label marketplace, and its Total Platform ecommerce solutions business — as critical to success in coming years. Next has generally avoided major forays outside the UK, citing the management time and investment required to build store estates and brand awareness. But the rise of ecommerce has lowered those barriers, and Next now regards growing overseas revenues as a way of leveraging the billions already invested in online capability. In the most recent financial year, overseas sales topped £500m for the first time. Brand strength Label, the group’s online marketplace for third-party brands such as River Island, Ted Baker and Superdry, is another way of pushing more sales through Next’s existing logistics network. What started out as an experiment in selling sportswear generated £464m of revenue in the year to January 2021. Hyman regards Label as a typical Wolfson innovation. “He could see that most retailers would give their right arm to have the well-oiled infrastructure Next had,” he said. Wolfson was also able to “see that while they are all competitors, Next was strong enough to allow them access to that machine. Next makes money from their sales and attracts their customers to its own website.” The final extension of Next’s online sales capability is Total Platform, a pay-as-you go ecommerce service for companies that want to expand online but cannot afford the upfront capital costs and the risks. It offers an end-to-end service, rather than focusing on websites and payments or warehousing in isolation, and charges users a simple percentage of sales. Revenues from five initial clients, including Reiss and Victoria’s Secret, will be modest at about £200m a year and Wolfson is wary of comparisons with online retailers Ocado or THG, whose technology licensing activities increasingly drive their share prices. Rossington acknowledged that “it is not yet possible to predict how big Total Platform could be off such a low base without evidence of further contract wins”. But he added that “over the long term” it could become more relevant to the company’s valuation than its retail businesses, and it certainly looms large over the group’s planned capital spending over the next five years. Despite the focus on ecommerce, Next’s store count has grown significantly, to about 500, since Wolfson took over, and some worry that in-store trading may decline more quickly than the group has projected. “There’s a bit of an open debate about the rate of attrition of the shops,” said Tony Shiret, analyst at Panmure Gordon. “Over the past few years [group] profits have basically been flat despite the massive growth online — the stores have become a bit of a drag anchor.” Succession question Inevitably after such a long tenure, there are questions about succession. When Wolfson accepted a non-executive directorship at Deliveroo this year, his first such external commitment, Next’s share price wobbled despite assurances that this would not affect his commitment to the group. One person who has worked alongside him said Next’s head office in Enderby, a Leicestershire village, also contributed to a “campus mentality”.     Q.1) Discuss how Next exploited its resources and capabilities to become an “online powerhouse” using value chain analysis (300 Words answers)