Third-party retailers are now being offered the services and know-how of the Next-backed distribution business.
Next’s reluctance to openly attach its name to its new third-party warehousing and distribution operation Ventura Network Distribution demonstrates just how seriously it is taking the project – “Ventura is a standalone business” is the edict from head office.
But it is somewhat ironic given that it is Next’s specialist expertise and huge financial muscle that are likely to make the service a viable and attractive operation to third-party retailers looking for a fulfilment partner.
Ventura Network Distribution will offer warehousing and distribution services to small- to medium-sized chains with between 50 and 300 stores via its fleet of 250 lorries, which have been stripped of Next branding to appease potential clients. It will also serve etailers’ deliveries and returns operations in a joint venture with courier Parcelnet.
The company is a division of Ventura, the customer contact operation that evolved from a financial services business called Club 24, previously owned by Hepworths which was converted to Next in 1986.
Club 24 was rebranded to Ventura in 1996 and now operates huge call centres for the likes of Otto Group, O2, the RSPCA, British Gas and BMI. Ventura Network Distribution is a spin-off of the customer contact business and has already secured four customers, although the names could not be disclosed as Drapers went to press.
Ventura chairman James Howell says: “We were thinking ‘what next for Ventura?’ What are the areas that Next is very good at? We run our own warehouses and distribution and we do that job well, so it made sense to take that to clients.”
Next brought its retail distribution in-house five years ago, and has built up complex systems exploiting the latest technology to create a distribution operation that is a leader in its field. Ventura has 5 million sq ft of warehouses that take delivery of product from suppliers, and nine depots around the country that handle the distribution of goods to Next’s network of 500 stores.
The advantages of offering its services to other businesses are twofold. Not only does it add a new revenue stream for Ventura, but the group can effectively share or offset its warehousing costs with its client base. As well as making cost savings for its main retail chain, Ventura can offer a competitive cost per unit (CPU) price to other retailers.
Ventura Network Distribution business development director Arron Kendall says: “Because we are in 500 locations, we can drive out synergy and harmony. We are delivering to every single postcode four to five times a week. We are already taking vehicles out every day, and because Next is so demanding we feel we can offer a better service as well as a better price.”
Howell says: “We can offer a very good service at a very good price because we don’t have to invest in a brand new infrastructure. We already have the tools.”
On the retail wavelength
Howell says that because the company is fundamentally a retailer, its frontline retail experience and understanding of the challenges involved with distribution to stores mean it will provide a better service than other third-party distribution operators.
Howell says: “We talk the same talk as the retailers. Because we deal with Next we know how important it is that deliveries are spot on.” Kendall adds: “We can provide a dedicated service at shared user prices – we can pick and despatch product and deliver it in line with a schedule. We can tell a store we will deliver at 10am with a half-hour window each side, so store staff know when the goods will arrive and can plan their day around it.”
Ventura Network Distribution also offers “pre-retailing”, which it describes as one of its “value-added services”. Pre-retailing refers to point-of-sale ticketing, security tagging and markdowns that can all be done before the product hits stores. Stock can also be transferred between stores to maximise sales, and real-time web-based technology means Ventura and its clients can track exactly where goods are in the distribution chain at any time from warehouse to depot to lorry.
Howell explains that when any new store opens, retailers are anxious to start trading as soon as the shopfit is complete, rather than waste several trading days by spending them pricing and tagging merchandise. “We can offer pre-retailing, meaning we can deliver all the stock priced up and with security tags straight to the new store in time for opening,” he says. “We can also take stock off-site before a Sale and handle the markdowns, so the retailer can keep stock room space free for full-price merchandise.”
These are all technology-rich services that small- to medium-sized companies may not be able to afford in-house, and that some third-party operators do not yet have, according to Kendall. “Some retailers may want more deliveries per week but may not be able to get that with their current provider, or if they can it will often come at a price. We can do that because we are out there delivering so frequently already.”
Ventura Network Distribution will also serve etailers and mail order businesses. It has the facilities to handle the level of returns that go hand-in-hand with these types of businesses because of the processes it has developed to support the huge Next Directory mail order business. While home shopping firm N Brown sold its fulfilment company Zendor for £3.83m in December to “focus on its core mail order businesses”, the scale of Next Directory means its returns operation, which it runs in conjunction with Parcelnet, is slick and its smooth-running is vital to the success of the business.
Shore Capital analyst John Stevenson says it makes perfect sense for Next to exploit the capacity available. “If you’ve got the capacity, you might as well use it,” he says. “Next has good execution on the distribution front. In terms of profit generation it is a nice addition, but not material to the group. N Brown had Zendor but it never really contributed to the bottom line. It helped with the learning process though.”
Howell says Ventura’s growth prospects are limitless, and that because of the parent company’s financial muscle the business will invest in new warehouses, new depots and new lorries whenever more capacity is needed. “If we need more vehicles we will buy more vehicles,” he explains.
So for third-party retailers, the costs of using Ventura are competitive and the technology is advanced, but what about providing highly sensitive information and products to what is essentially, in the form of Next, a rival retailer?
Howell says potential fashion retail clients should have no concern about giving the business access to their inventory and products because Ventura is run as a completely separate business. He insists that no one from Next has access to Ventura’s data. “People from Next don’t go wandering around Ventura. If we allowed that, we’d be out of business before we’d even started,” he explains.
Ventura clearly means business – this is a credible venture given the scale and expertise, and one that Next is clearly committed to building upon.
“People were let down over the Christmas period and have come to talk to us,” says Howell. “We’ve got a lot in the pipeline that we’re very excited about. The way we are going, we could have twice as many clients signed up by the end of the year.”
250: The number of Ventura lorries delivering to Next stores
5 million: The total square footage of Ventura’s warehouse space
£190.9m: Ventura’s sales for the year to January 2007
£23m: Ventura’s profit forecast for 2007/08