LONDON • British fashion retailers will switch their spending firepower to technology from the high street this year after online shopping became the key driver of sales growth over the festive period.
Marks & Spencer is investing in apps, its website and logistics, while spending £350 million (S$623 million) over five years to close 10 per cent of its clothing and home space.
Britain's biggest department store, John Lewis, said it was cutting staff bonuses in part to enable it to invest in its online operations after 40 per cent of its Christmas sales came from the Web.
Next, which failed to keep up with its rivals for a second Christmas in a row, will spend £10 million to improve its online operations and marketing. "They will have to invest in infrastructure and it will weigh on margins, but if you get it right, you have a profitable online business," said a large institutional investor in British retail, who asked not to be named due to company policy.
"And you can engage on multiple platforms."
The renewed drive in technology comes as British Web-only players Asos and Boohoo continue to race ahead, helping Britons to embrace online shopping more quickly than their European cousins.
The pressure is relentless. Asos, with nearly five million active users in Britain, said it would increase its capital expenditure to keep ahead of the pack after it posted 18 per cent British sales growth in the four months to the end of last year.
Boohoo grew British sales by 31 per cent in the same period.
Online sales have been booming in Britain for years, with e-commerce accounting for nearly a quarter of all purchases in December, said the British Retail Consortium.
In the 52 weeks to Dec 18, overall fashion sales fell 2 per cent, according to market research firm Kantar Worldpanel, while pure online players grew 7 per cent as fashion lovers snapped up goods through simple apps on their mobile devices.
While trading updates show that traditional retailers grew their sales by selling additional goods to customers picking up online orders in store, the move online also brings new challenges such as the high number of goods that are returned.
The industry estimates that around 30 per cent of womenswear items bought online are returned.
Traditional retailers have harnessed the Web by persuading customers to pick up online-ordered goods in store, forcing firms to speed up delivery logistics and increase storage space in their shops.
"We are still opening shops, but we will be opening fewer going forward and we will be investing more in changing existing shops so they can fulfil that different role more," said Mr Charlie Mayfield, chairman of the employee-owned John Lewis Partnership.
The 133-year-old Marks & Spencer, which has struggled for years to grow its clothing business, beat forecasts for Christmas trading as investment in its app for mobile devices helped boost online sales.
More than 60 per cent of all goods sold online were picked up in store - known as click and collect.
John Lewis, one of the leading retailers online over the last 15 years, said it would speed up its Internet strategy after 40 per cent of its Christmas sales came from the Web, up from 36 per cent last year.
But the cost to transform the business is clear, with operating profit down 31 per cent in the six months to end July. The company said trading profit would come under pressure this year and the need to invest, plus the weaker pound, meant staff bonuses would be "significantly" lower.