Next plc SWOT and PESTLE Analysis

Strength

1. Aggregation of all assets on a single platform: The company’s NEXT Platform combines all assets – stores, warehouses, delivery networks, systems, marketing, credit facilities – to create a single powerful aggregation business that sells hundreds of third-party clothing and home brands alongside its own NEXT merchandise. In the UK, the scale of the Online business, supported by the store network and strong relationships with partner brands, enables NEXT to offer a broad product range to customers in order to satisfy their need for choices. In 2019/20, over £500m of other brands’ products were sold through LABEL. The lower barriers to entry created by the shift to online retail have enabled NEXT to take advantage of overseas markets, and in 2019/20, Online Overseas sales exceeded £450m. The platform has three very clear objectives: to be the customers’ first choice destination for clothing and homeware, to be the most profitable third-party route to market for partner brands, and to provide high quality service.

2. Value addition through product choice, strong third-party relationships, and cost and quality control: The company aims to add value through three main ways. One is by offering more product choices through a combination of NEXT products and almost 1,000 third party brands across a range of products in clothing and homeware categories. Another value addition method is to be the most profitable route to market for third party partners. Perhaps the most important value addition comes from the cost and quality control system. The company’s sourcing structure provides high quality products at reasonable prices for customers. It also helps in maintaining the margin through efficient product sourcing, cost control and stock management.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Reduction in carbon emissions: There is rising concern about global warming caused by carbon emissions. Companies are doing their bit to reduce emissions from their daily operations. To accomplish the same Next had a new target set up in 2019, that concentrates on its global Scope 1 and 2 emissions aligned with the existing Science Based Target (SBT) footprint approach. The ongoing review of Scope 3 emissions include the analysis of the product's impact and its progress in alignment with SBT methodology. Besides, the UK government has set new laws that focus on net-zero carbon emissions by 2050 and limit temperature rise to 1.5°C with IPPCs recommendation. Thus, Next along with BRC and other members is working on cataloging the actions that should be adopted by retailers apart from an SBT commitment.

2. Responsible water management to address shortage: Most parts of the world, particularly in the UK are facing water crisis with increasing demand and supply shortage. Next’s direct operations are not major consumer of water, however, the company has still installed AMR meters in around 350 stores. During 2020 the company has directly used 237,116 cubic metres of water in its UK and Eire operations. The third-party café concessions operating within the stores further uses 72,592 cubic metres of water, totalling 309,708 cubic metres, down from 340,088 cubic metres in 2019. Also, ample quantities of water are utilized by the extended supply chain, operations like laundries, mills, and tanneries. Thus, to maintain safe, sufficient, and clean water for the local communities an effective water management plan is essential. The company is working directly with suppliers through the ZDHC (Zero Discharge of Hazardous Chemicals) program to prevent water contamination. The ZDHC program provides suppliers with information and training to ensure proper treatment of wastewater before discharge. By December 2019, there were 157 wet processors of Next signed up on the ZDHC gateway.