What's Next?

In what is an emotionally charged market, the retailer has been lumped together with its fellow middle-market inhabitant Marks & Spencer, whose shock profit warning sent shockwaves through the sector at the beginning of the month.

Although the subsequent forecast slashing and negative sentiment towards Next looks set to be backed up by its results next Wednesday – Next is expected to reveal a 5 per cent like-for-like slump – putting it in the same camp as beleaguered M&S may be over-egging the pudding.

While the two retailers face the same challenges, both structurally and in terms of shattered confidence among its core consumer, Next’s bottom-line performance could be more positive than thought.

Next has been focusing on securing its cash flow and defending margins, rather than protecting market share – M&S’s preferred route.

Either way, as the fraught mid-market continues to suffer as customers turn to value or specialised retailers for their discretionary purchases, Next needs to up its game.

Along with M&S, Next is a mature retailer lacking the kind of novelty and newness needed to entice shoppers who, now more than ever, need to be given a good reason to visit.

As the supermarkets and Primarks of this world command the value end, Next needs to focus away from competing on entry price points and find and develop its niche ground.

In Next’s case, this should form the development of a fashion edge and prominent brand positioning in order to stand out on the crowded high street.

Although, fundamentally, Next’s customers are those likely to be hardest hit by the credit crunch, the retailer would benefit from product style tips from the likes of the chipper Zara.

The reaction to Next’s Signature range is unlikely to have filtered through and as it only accounts for about 3 per cent of sales, its effect will be small at present. But it represents a real opportunity for Next – if it doesn’t position itself out of the market with its higher prices.

Next could also do with an innovative M&S-style ad campaign to inject some vibrancy and encourage depressed customers to think of it in an exciting light.

This represents a big opportunity for Next, as M&S stands accused of letting the Twiggy et al ad campaign go off the boil.

Next’s reputation has slid in the past as it lost its way among rapid expansion. It has the chance to turn itself around from a stable base and should be confident focusing on what’s Next.