Plenty of festive cheer for Littlewoods Ireland

Geoff Scully, the managing director of online and catalogue retailer Shop Direct Ireland, thankfully is not wearing a Christmas jumper when we meet in Dublin amid the rain-soaked shoppers.

The company, owned by the Barclay brothers of Telegraph fame, trades in Ireland as Littlewoods. Earlier this week, it gave a High Court undertaking not to copy the Christmas jumper design of Zatori, a small Co Laois company.

Woolly jumper-gate aside, Littlewoods has had a rather jolly festive period in the Irish market. "We've had an amazing Christmas. Sales since the start of November are up 20 per cent on last year," says Scully, a former Arnotts buyer.

The company has been on a roll for 18 months, benefitting from the ongoing growth in online retailing. Accounts provided to The Irish Times – for the year to the end of June 2013 – show sales of just over €56 million, up 2.8 per cent. Between January and June its sales climbed 5.3 per cent, and by 12 per cent since.

It’s a far cry from the woes of traditional bricks and mortar retailers, who appear to be having a more Dickensian Christmas, judging by the muted mood music emanating from the sector. Littlewoods is reaping the rewards of price cuts across its range over the last year or so that averaged 17 per cent.

Most traditional retailers, many of them bound by upward-only rents, would be unable to implement such swingeing reductions, having already carved prices back to the bone since the downturn began five years ago.

Transaction values
Scully says, however, the notion that online retailers can generate super-normal profits is a "myth". Shop Direct's accounts show profits of €2.27 million, a rather pedestrian net margin of four per cent.

“Our whole strategy now, following the price cuts, is to drive volume. Retail prices have hit the bottom – they can’t go any lower,” said Scully.

The Littlewoods Ireland operation, formed via the 2007 merger of the Family Album and Kays catalogue businesses, has 500,000 registered members on its website. Scully says 200,000 of those have shopped with it in the last six months, with average transaction values of about €100.

The old catalogue model, where customers thumbed a brochure at home before ringing in with their orders, is finished, according to Littlewoods. Scully has shifted the company in recent years more towards straightforward online retailing.

When it rebranded six years ago, 12 per cent of its sales came from the web. Now, the figure is 87 per cent. It will launch a new internet platform in March, which he says will use registration details and cookies to give customers more “relevant” content.

"Personalisation is the buzzword now," says Scully. "If you Google 'red dress' for example, hopefully it directs you to our site if you are registered. Rather than list you the maybe 25 full red dresses we stock, perhaps it will only list the 17 that come in your size."

One of the legacies of Littlewoods older catalogue persona is a reliance by its customers on its credit facilities – Shop Direct is a licensed moneylender. About 65 per cent of its purchases are long-fingered by customers.

The company has clamped down on bad debts, which are down 15 per cent according to the accounts. “Fraud is a problem regarding credit facilities. We don’t have access to a suitable credit bureau facility. We’ve had to hire more staff to deal with bad debts. Basically, we eyeball all new accounts.”

From next March, Littlewoods will introduce a number of new initiatives for its Irish customer base. It will launch "click and collect", whereby customers can order online and pick up their purchases from the network of Payzone outlets spread around the country. It will also deliver to Nightline couriers' Parcel Motel depots, in locations such as garage forecourts.

Shop Direct in Britain also owns a number of other online retailing brands, including Very, a youth-oriented offering, and Isme, aimed at older shoppers. Scully is considering bringing these brands into the Irish market, perhaps with their own fully functional websites.

“They are possibilities. We always said the day was coming when we would bring in new brands. That day is getting nearer,” he says.

Serious push
Despite the company's plans to expand further in the Irish market, Scully says the country is behind the curve in terms of e-commerce. Regarding Ireland's reputation for being a technological hotspot, he says: "That means we have a good corporate tax rate, and little else."

There is a dearth of third level courses to train young people in the art of online retailing, he says. The introduction of postcodes will help the industry with its delivery systems, he says, but Ireland desperately needs a credit bureau suitable for use by e-commerce businesses.

“Ireland is not set up for e-commerce. In the new year, we will be asking the government to make a serious push on this. The wheels are moving too slowly.”