Hello and welcome to the NEXT plc H1 Results Call for Analysts. My name is Becca, and I'll be the operator for today. Today we're going to be starting with a Q&A session, so to ask a question, please press star followed by one on your telephone keypads. And our first question comes from Charlie Muir-Sands of Exane BNP Paribas. So Charlie, please go ahead.
Yes, good morning. Thanks very much for taking my questions. A question about your outlook around sourcing. I think you flagged that on average you think you'll see around a 2.5% ASP increase in the first half of next year. I just wonder whether that was enough to deliver flat bought-in margins year-o ver- year or rebuild margins, perhaps even back to 2019 levels, given you indicated you'd taken a little bit of a hit in the first half of this year. And then my second question is, I just wondered if you could give us any color around whether the customers you've been recruiting over the last couple of years are demographically particularly different from previously. Are you managing to recruit younger customers, for example?
Yeah, okay. Thank you, Charlie. Both good questions. In terms of margin, we're anticipating that we will have the same margin target, so we're not looking at sacrificing any bought-in gross margin. What we won't do, and what we never do, is if we've overachieved in a given season, we don't then build in that overachievement into the following season. So we will be going back to the target that we had in 2019 and 2020 and building in neither any overachievements or underachievements in those years. And we do think that 2.5% is enough to pay for the underlying cost-price increases. And that 2.5% comes largely from the stock that we have visibility of because we've already bought a great deal of the stock that we plan to sell, certainly in the first three months of next year, if not later. Second question is on demographics.
There's no significant difference in the demographics that we're seeing in terms of the people that we are recruiting. You'll remember we went in last, I think, six months ago, we went into the fact that we were seeing a general broadening of our customer base, and we haven't seen any change to that trend. We're still seeing that sort of broadening trend is continuing.
Great. Thank you.
Thank you, Charlie.
Thank you. The next question comes from Adam Cochrane from Deutsche Bank. So Adam, please go ahead. Your line is open.
Good morning. Thank you. A couple of questions, if I may. When you're talking about the new capacity that's going to come through from Elmsall 3, given the size of that capacity increase, do you have to manage the utilization rate across the warehouse in order to stop any sort of profit impact from lower utilization? Is the first one. And then secondly, you again talked about commission rate cuts on the Label business. Now, I think you're sort of aiming to be the most profitable route to market. Do you get any feedback on that? Is that where you are now, or is there further investment that might be required? And then the final one was really, have you had any learnings from the Total Platform given the starting of operations and the further clients you've signed up? Thanks.
Yeah, okay. So starting off with the lower utilization on Elmsall 3, there's no particular piece of management reactivated. We're not anticipating any operational inefficiencies from having the additional space. In fact, quite the reverse. What we'll do is we'll move as much production as we possibly can into the new space because it's cheaper to pick, pack, and dispatch from that space than it is from the old space. So the empty space, if you like, will end up being in our existing warehouses rather than the future ones. But where we will get the inefficiency is obviously the rent for the entire half of that building. In fact, the entire building kicks in straight away, and half the rates for the part that we're using kick in.
So what you will see is a step change in fixed costs, and it's unlikely that the percentage increase we get in sales that year will be as big as the percentage increase in fixed costs. Some of that fixed cost increase will be paid for by increased operational efficiency, but not all of it. So in year one, you would expect overall warehousing costs netting off the efficiencies in the new warehouse versus the additional fixed costs. You would expect that we would see net margin erosion from warehousing. There'll be a bigger percentage of sales in that first year. And then that's kind of always what you get. Basically, you get an increase in efficiency of your variable costs when you're at new production, but a decrease in the efficiency of the leverage of your fixed costs.
In terms of the commission rate and feedback from clients, we haven't had anyone say, thank you very much for being our most profitable route to market, but equally, no one has said to us, oh, no, you're not, which gives us encouragement. And in terms of the lessons learned from starting up Total Platform, as with all these things, we had planned lots of contingency into the systems and warehousing work for the various Total Platform projects we had. We took all of the work that people said they were going to need to do and then estimated that they would sort of like a domestic building project, and it's always going to be significantly more than that.
What I can say is that we used all of the contingency that we had in terms of time and a little bit more in terms of systems and warehousing time. So it wasn't in line with the estimates we got from the people who were building it, but it was in line with our own estimates, broadly in line with our own estimates in terms of costs and generally the projects. In terms of costs, came in slightly higher than the estimates we got, but in terms of time scales, were generally delivered on time.
Thank you.
Do you need to follow up on any of that? Is that okay?
No, that's brilliant. I think in terms of your 5%-8% margin outlook on that, have you had any confidence where you can come within that range? Because it makes, I suppose, quite a big difference in the longer term based on what you've seen or early days.
Yeah, I think first of all, really, it's ultimately within our control and that we're not going to do it for no margin. We just won't sign the deal if the margin isn't where it needs to be. I think in general, our view is that the bigger the contract, the lower the margin we can take. So in general, small clients, where there's a relatively high fixed cost element to sort of setting it all up, will be at higher margins than the very big clients where we will accept lower margins.
Good. Okay.
Thank you, the. Next question, please.
The next question comes from John Stevenson of Peel Hunt. So John, please go ahead when you're ready.
Thanks. Morning, Simon. Can you talk a little bit about how your view of customer lifetime value has changed over recent years? I don't know to the extent it's been driven by Label, and is there a positive relationship between Label and own brand spend? And then second question is in terms of how you think about the cost of acquisition. Is it just a case of getting a decent return on the first order, or are you willing to spend more to acquire certain types of customers or maybe sort of potential credit shoppers?
Yes. Okay, so the first thing is, actually, the second question answers the first, so we don't look at customer lifetime value as an abstract generality. We only really look at the concept of lifetime value in the context of how much it costs to recruit someone, and what we do is any advertising campaign that we run, all marketing campaigns, have to have an appraisal in the same way that a new store has an appraisal, and we will look at the first order sales, second order sales of any given cohort and look at sort of how different cohorts recruited through different media and in different territories behave historically and assume that that's the way they're going to behave going forward.
In general, because our return on advertising spend is very we keep the returns very high, the first order tends to be enough to pay for the vast majority of our advertising. Where we take a view tends to be overseas, where we'll accept a longer payback, and that is because we are much more certain that the sales we're generating are incremental overseas. It's much less likely than the customers that we've recruited would have joined us anyway than it is in the U.K., where we think only 30% of even the new recruitment advertising, only 30% of the customers who appear to be recruited through digital advertising are over and above what would have come to us naturally.
What we've seen, and we've written a lot. I realize you won't have time to read it all, but we've written quite a lot about this in the report about our marketing. What we've seen over the last five years is, as we've invested in better software and improved the relationships we have with key digital marketing suppliers and eliminated some of the inefficiencies in the supply chain in that business, we have seen much improved returns from digital advertising. That's what is driving the increases that we're seeing at the moment and the increases we expect to make next year in digital advertising.
Okay. And when people have come in, the new customers have come in specifically attracting those sort of joint brand marketing efforts that you mentioned, so Validus and so on. How many of them sort of go on to buy NEXT own brand stuff as well? Is there a positive relationship?
It's very early days, John. So the honest answer is that we haven't yet because we only started it really six months ago. And to get a sort of a clear picture of lifetime value, you really need to be looking at two, three years. But the evidence we've got is that the customers we are recruiting on those brands are, or that when people are recruited to buy a specific brand, they do buy that brand, but a good proportion of them then go on to buy NEXT product as well.
Okay. Brilliant. Great. Thanks, Simon.
Thank you. Okay. Next question, please.
We now have Anne Critchlow from Société Générale. So Anne, please go ahead. I've opened your line.
Good morning. Thank you. I've got two, please. First of all, are you seeing any trend away from the home category now? And what's your view on the sort of hybrid working from home that we might end up with? Do you think this category will be sort of raised permanently in terms of interest from consumers? And then secondly, on NEXT Total Platform, in March, you gave us basically a sort of descending order of size of the different brands that you're working with. So Reiss being the largest, down to sort of Childsplay and the new brand. Just wondered where Gap fits in with that in terms of size, please. Thank you.
Yeah. Okay. Thank you, Anne. So, trend for home. First of all, no trend in the cyclical market is ever permanent. We are expecting the extraordinary growth we've seen in home sales to subside as time moves forward. We are already seeing evidence of that. We are already seeing that home sales are not going at like the pace they were six months ago. I think some of it's being driven by working from home, but I think the rest of it was being driven by just being at home. I also think that these things do create their own momentum in that the trend towards redecorating your home isn't. The more people who are redecorating their home, the more other people join in. It's like all trends. They are kind of a little bit catching.
So I think there is momentum in this trend beyond the end of lockdown, but I think it will return to more normal levels over the next sort of 12 months. In terms of Total Platform, Gap is not as big as Reiss or Victoria's Secret because it doesn't have a strong retail element. We're only opening really five retail outlets for Gap in the U.K., and they're going to be relatively small. There'll be one large flagship store, and the other will be five small concessions. So Gap would come probably just up below Victoria's Secret, but that is because of the lack of retail business through it.
Great. Thank you.
Thank you. Okay, next question, please.
The next question comes from Tony Shiret from Panmure Gordon. So please go ahead, Tony.
Thank you very much. Yeah. John's asked for some of my questions. I just wondered if you could let us know what percentage of your online visits come from SEM, SEO, and direct, please.
Yes. No, I don't have those numbers available to me at the moment, Tony. Apologies. We will get them.
I'll take them out, Tony, and I'll drop you back on an email later.
Okay. On a sort of more general question, you've got a huge amount of data analysts and stuff like that. Any particular insights into what we might expect in the future from their analysis at the moment in terms of the online stuff?
Yeah. To be honest, the data scientists we employ are more employed in sort of productionizing our advertising and advertising our online marketing. So where we are seeing the vast majority of the work done by our online sort of digital analysts is about improving the response of our advertising offsite and also the response to our content onsite. And I'm not sure this entirely answers your question. I can't give you sort of general insight into how the 8 million consumers that we've got on our site are changing their behavior as a whole because there is no big trend there other than the sort of broadening of demographics that we've talked about in the past.
But in terms of where we're making good progress is on the sort of personalization of products on our website, where we are seeing where we've developed new onsite marketing techniques that target people much more precisely on the homepage and the exit page. And we are seeing some good traction on that.
Okay. Thanks.
Thank you. Next question. Sorry.
We now have Simon Irwin of Credit Suisse. So Simon, your line is open.
Morning, Simon, Amanda. I've got three for you. First one is your explanation of sales over the summer appears to be quite countercyclical and different to what we're seeing from other retailers, and overall demand has been relatively weak, and a lot of retailers have blamed the lack of holidays and kind of reasons to buy product, so I was wondering why you think that you seem to have been a beneficiary of that trend rather than being penalized. Second question just is around online capacity prior to Elmsall 3 coming on. Is that going to constrain either the core online business or your ability to take on more Total Platform customers over the next couple of years until that comes through?
Thirdly, as you move towards being a platform that isn't a, sorry, a marketplace that isn't a marketplace, as it were, do you think all of your third-party brands are going to be able to kind of meet your 48-hour deadlines and be able to kind of get the product to you fast enough to meet those service commitments?
Yeah. Okay. So in terms of sales over the holiday period, I think that any difference that you'll see will be down to mix. So for example, the fact that we are quite a big children's and home retailer is going to have a different effect on home too, say, someone who is a women's fashion provider where things like holiday clothing, beachwear, sandals, all of those things are much more important. And those holiday-specific products, that overseas holiday-specific products, definitely did do worse in that period. But things like return to school, sort of warmer summer children's clothing, and home in particular all did much better in that period than we would expect. So I think the difference between our performance and others is going to be down to mix more than anything else.
In terms of constraints on warehousing, I don't think it will constrain our core business, but in terms of additional new clients for Total Platform, we won't be able to accommodate significantly more than we've already got within our own warehouse complex until we get sort of towards the end of January 2022, towards the end of 2023. That doesn't mean that we can't take on any new Total Platform customers. So for example, Victoria's Secret is not actually warehoused on that main site. We put that in a satellite warehouse. So I don't think it will necessarily completely preclude new customers, but it will mean that when we initially take them on, they won't be as efficient as they could be in terms of our cost efficiency as they would be where we've been able to get them to our main warehouse complex.
And we will, I think, take a view on that as and when different opportunities come up as to whether we take sort of six months to nine months of less efficient operation in order to win contracts. And then the final question was. I wrote it down, but I can't remember my own writing.
Can you just repeat that question? Sorry.
Yes. It was just whether all third-party brands are able to meet the kind of service provisions that you want in order to get within the 48-hour window, or whether you've at the moment just been kind of cherry-picking some of the larger and more efficient operations?
Yeah. I mean, I think what I should say is that the vast majority can because just so that we're absolutely clear on this, we're picking it up from their warehouse. They're not delivering it to us. So they've only got to get it to their warehouse door. If we pass them an order on Monday night, they don't need to get that order to us until the end of Tuesday. And they only need to get it to their warehouse door, not to our warehouses. And also remember, it doesn't come to us sort of with a customer name on it. They are just picking single units that are not packed singly or by customer. So it's a relatively straightforward pick. And what I should say is that for the vast majority of our Platform Plus partners, that hasn't been a constraint.
Where we've moved Platform Plus into on fashion, on home, home is the one area, and we have detailed this in the report, where we have got some Direct Dispatch to customers. So where we're talking about big tickets, large items that don't tend to consolidate with our own items anyway, we have been working with some home partners for them to Direct Dispatch that product to the customer. With those clients, what we're working towards is it will still go straight from their warehouse to the customer, but it will be injected into our two-man delivery fleet, and we're already a good way through converting a lot of the Direct Dispatch home clients into what we're calling Direct Dispatch through our network, and again, the advantage of that is it gives us the leverage that we have through better delivery costs.
On the whole, we're getting better delivery costs than our smaller home suppliers, the best two-man rates. But it also means that we get control of the service from the moment the item leaves our warehouse, and we get to deal with returns and all that other good stuff, which means that we don't see a degradation of service. Does that answer your question?
Yeah. No, that's great. So the only real constraint for most brands, they have to have essentially a U.K. DC of some description.
Yeah. I mean, there is one supplier that we're working with that has an overseas warehouse, and in that case, we are taking a view on a slightly longer delay for the customers.
When you have masses of capacity with Elmsall 3, would you consider holding stock on behalf of third-party, particularly overseas-based brands?
In effect, that's what Label does. A lot of the product that we sell on Label is commission stock that doesn't belong to us. It belongs to our partners. We sell it on commission. So in effect, that's what Label's already doing.
Okay. Great. Thank you very much.
Okay. Thank you, Simon. Next question, please.
We now have Michael Benedict of Berenberg. So Michael, please go ahead when you're ready.
Morning, both. Thanks very much for taking my question. Just one on supply chain disruption, please. I wondered if you could give any color on any particular categories that are being impacted. And then in terms of your successful offsetting of that, are you able to quantify the increase in your online SKUs over the last couple of years, please?
Yes. We've actually detailed the increase in online SKUs against five years ago in the report. And I think it was actually on one of the slides that I presented very quickly today. So it's in your pack. If you go back to the report that we produced six months ago, we actually gave a detailed chart, which I think showed options over five years for each year, both for Label and NEXT.
Yeah. So the NEXT options over the last five years are up 120%, 55,000.
Yeah. And then in terms of supply chain disruption, the area that we've seen the biggest impact is home, large goods from the Far East. And there are two things going on there. First of all, is that the surge in demand meant that we had very little stock in the business. So that was the area that needed the stock most. But because it is very shipping hungry, as you need a lot of shipping for a relatively small number of products, it was the area where we had the biggest delays. So the larger the item was, and the more likely it is to come from the Far East, the more disruption that we had. Other than that, there wasn't any particular category that suffered. It was more about territories. So China suffered because the big port in Yantian closed down for, I think, three weeks.
That took a long time for that delay to work its way through the system. Then in countries like Bangladesh, there was some disruption from COVID at both ports and factories.
That's very helpful. Thanks very much.
Okay. Next question, please.
We now have Anubhav Malhotra from Liberum Capital, so please go ahead.
Hi, team. Part of my question has been answered, but I'll still ask it to see if you have any other views on it, so just on the guidance for average selling price increases for 6% in home and 1% in fashion, I know you said it's a bit of a reflection on the cost pressures you're seeing on the shipping side, but do you think there is any reflection on the level of competition and what the competition is doing in terms of taking prices in fashion that you are restricted in your ability to take price increases there, and the second one on NEXT finance business and the GBP 20 million provision that still exists, and the provision levels are very close to what they were in 2008, but clearly the consumer finances at the moment are much better than what they were.
And you're seeing that in the demand for online customers. So any particular reason why you're still going ahead with the provision? Thank you.
It's a good question. In terms of the supplier base, I mean, at the end of the day, we take a view on prices based on cost price rather than what's going on in the market. And we're certainly not seeing any cost pressures on fashion or home in terms of competitive pressure on pricing, downward pressure on pricing in the market. So that is not the reason for the differential. The reason for the differential is down to the difference in the cost of goods. And the vast majority of the difference in cost of goods is down to shipping costs. And shipping costs are just a much bigger percentage of home products than they are of clothing. So that difference is entirely down to input prices rather than market prices. In terms of the provision of GBP 20 million, it's a discussion that we have had regularly.
Our view is that we haven't yet seen the end of furlough. We haven't yet seen. We don't yet know what the longer-term effects of COVID will be or the pandemic will be in terms of things like employment. But I think you're right in that the signs are looking better than they were, and that provision statement, we will keep under constant review.
Thank you.
Okay. Next question, please.
We now have Richard Chamberlain of RBC. So Richard, I've opened your line.
Thank you. Morning, Simon. Two from me, please. Can you just touch on the margin on sales you're achieving through aggregators? Has that had much impact yet on the overseas margin? That's the first one. The second one's on beauty. Do you feel you've reached critical mass yet with the major brands? And I guess as a supplementary, do you have any plans to scale up your sort of store presence on the beauty side? Thanks.
Yeah. Okay. So starting with the aggregators. We work with aggregators on a lower margin, but not a ridiculously thin margin. Where we can't make our target margin on aggregator sales, we'll put prices up. And we're quite happy to trade in countries at different prices on aggregators than we are on our own side. So the margin is lower, but maybe high single digits rather than. It's not sub 5%. So I don't think we're going to see a material impact. But you are correct that the bigger the 14% net or so that we make overseas will diminish the bigger the aggregators are as part of the pot. But equally, there's no investment required really to service that because they're doing all the investment. So we're not concerned about making a lower margin on a very low-risk, low-investment sale.
But you are correct that we should see margins sort of diminish as the aggregators increase in size. Second thing is in terms of critical mass on beauty, I don't know what critical mass on beauty is. No one's yet told us brand by brand what that counts as. So I'm not sure I can answer that question. In terms of retail expansion, I think it's very unlikely on any of the evidence we've got at the moment that we will open more stores at this point. I think that we are still with COVID restrictions still in place and people still COVID nervous, if not COVID limited by. They're not limited by the law. They are limited by what they're prepared to do.
And the beauty stores, in terms of their effectiveness, a lot of the effectiveness is about the salespeople and the application of products to customers by sales staff to help them decide what they want to look or smell like. And that is very hard even today. So we've yet to see very positive signs out of those retail stores. But equally, we don't have any plans to close any of them.
Okay. That's helpful. I mean, just to follow up on the beauty then, maybe to phrase it slightly differently, I mean, do you feel that there's still sort of gaps? I mean, obviously, you've done a great job acquiring, and clearly the brands are more than happy now to come with NEXT, the Chanel , and the Clarins of this world. But are there still a number of significant major brands that you feel that you could and should add to the beauty offer?
Yeah. We have got a list of brands that we would like. And I think that most people. I'm not going to say them because we are talking to a lot of them. And I don't want to, in any way, affect our discussions by naming any individual brand in public. But I think it's very clear which brands we haven't got that we would like. That said, we are very happy with the performance of the brands that we've got.
Sure. Sure. Okay. Thanks very much.
Thank you. Thank you. Okay. Next question, please.
Thank you. If you would like to ask any further questions, please press star one on your telephone keypads now. And we now have a follow-up question from Charlie Muir-Sands from Exane BNP Paribas. So Charlie, please go ahead.
Yeah. Thanks and thank you for the great amount of reassurance with respect to your own capacity for peak this year and the contingencies you can use. I just wondered if you could talk about whether you see any constraints around last-mile delivery, carrier capacity this year, and also whether you're seeing any particular cost inflation from your carriers?
Yeah. I suppose on the inflation side, not yet. But we would only see that once a year anyway when we have our discussions with them about repricing. We have a pricing conversation with our suppliers once a year where within our contract, various forms of inflation are passed through at different levels within our contract. So we wouldn't be seeing those yet anyway.
That's correct. Yes.
So that's the first thing. The second thing is in terms of capacity. I've got to be careful. I don't want to give information away about other parties, but it's not mine to give away. But at the moment, as I understand it, our courier companies are seeing no problem at all recruiting new couriers. So unlike some industries which are seeing a significant squeeze, our impression is that the courier industry is not one of those industries. And actually, having come through the pandemic, it appears that there are quite a lot of people who want flexibility of that work. So we're not concerned about the availability of couriers at this point. Does that answer your question?
Yes, it does, and I'm sorry, and one other follow-up question of a completely different topic. I'm probably trying to compare apples and oranges, but I think five, six years ago, when your credit customer base was shrinking, you used to talk about a churn rate of around 20% per year, i.e., sort of a retention rate of 80%. I appreciate that's the base, not of new recruits. But you're now talking about retention of circa 20% versus five, six years ago in a bigger picture sense. Is churn higher than it used to be, or is the immediate pre-pandemic the picture?
Yeah. No, no. It's a really good question. The answer is no. If you look at the individual type of customers that we're recruiting, we're not seeing any particular increase in churn. So if you look at a customer who's been with us for five years as a credit customer, the churn of those customers is no higher than it would have been five years ago. But there are two things that have changed. The first is that we have far more new customers. And new customers have always churned much, much faster than existing customers. So once someone has ordered twice or three times, they are much less likely to leave us than someone has ordered once. So the churn rates you're seeing is sort of 18%-30% in new customers, which is very normal.
But the big difference of our customer base today from where it was five years ago is that we have a much higher participation of cash customers. And cash customers churn faster than credit customers. So our overall churn rate has increased, not as a result of individual customer types churning faster, but as a result of the change in the mix of our customer base away from credit into cash customers. And also recently, the increase in new customers as a percentage of total customer base, both of which will increase our overall churn. But that shouldn't affect the economics of the business because the appraisal rates we're using, the appraisal we're using to recruit new customers are exactly the same. And their performance once we've recruited them, as we sort of tried to demonstrate in their presentation, doesn't appear to have changed either.
That's great. Thank you.
Okay. Next question, please.
We now have Ben Hunt from Investec. So Ben, please go ahead.
Good morning. Just adding on to those comments of churn that you were describing then. What should the impact of increasing the range and the skew have been on churn? I mean, obviously, it's going to bring in new customers, which potentially increases that, but then it can also retain them. So I'm just intrigued as to how you think that would have impacted churn as well or any details on that.
Yes. I mean, I think you've said it all. It may bring in a customer who's less likely to stay with us because it's a customer that hasn't come with us specifically for NEXT. And therefore, our general ranges are less applicable than someone who's joined specifically for NEXT. And equally, the breadth of our range may increase retention because you're more likely to come back because you're more likely to find something that you like on our website. I think of those two factors. The second one is by far the most important. The vast majority of new customers and when I say the vast majority, I'm talking much more than 90%, of new customers, the first order will have at least one NEXT item in it. So there are very few people who come to our site and whose first order is a non-NEXT item.
To that extent, I'm not expecting any dramatic change in retention rates. What I think we have seen over the last five years is an increase in average order value for any given cohort of customers. I think that is being driven by the extension of the ranges, both of our own product and, more importantly, of label and the new products that customers really didn't know that we, a lot of customers weren't aware of the fact that we had a very big home range. Even sort of four or five years ago, awareness of homes was relatively low online. Obviously, new categories like beauty should increase the average amount of customer spends with us in a year. What effect it has on retention rates is too early to say.
Great. Thanks. Very insightful.
Good. Okay. Well, have we got any more questions? I think we've got a second round question. Is that right?
We have a follow-up question from Simon Irwin of Credit Suisse. So Simon, I've opened your line. Please go ahead.
Hi. Just a couple of quick ones on costs. Firstly, has there been any reallocation of central costs between retail and online, given obviously the diametric direction of sales growth? And would you anticipate that happening next year? And secondly, obviously, big improvement in terms of the cost metrics coming out of catalogs. What's the scale of the opportunity left in that area?
Yeah. Okay. So in terms of the reallocation, we detailed this in the report, actually. So you can kind of, because you're all brilliant planners, you can do in your heads what I haven't immediately in my head to work out what percentage of our costs are actually allocated on that basis. But I think there was a GBP 14 million swing in the first three weeks, sorry, first three months, when we were shut between online and retail. And that was simply a question of reallocating the cost between the two businesses based on their relative sales. And those costs, and that's things like product, HR, finance, where it's impossible to say which side of the business those costs fall. We allocate them on a just pure turnover participation basis. And we will continue to reallocate them in that way going forward, which I hope answers that question.
Thank you. And in terms of the photography and catalog?
Yeah. I think the gain with detail, really, the gain is just financial, and we've detailed what that was. I think it's about 1.9%.
Yes. It's GBP 30 million in the year.
Yeah, so that's GBP 30 million gain. I think as fast as we can, we will invest that in digital marketing, so we're not looking to maintain margins where they are because we've got that gain from photography. We would aim to redeploy that expenditure into profitable marketing, and our aim is to build up our digital marketing budget as and when we find profitable avenues to invest it, so I think you should see over time that margin gain reversing out as we find other profitable ways of investing that money.
But is there a further opportunity to say, do a similar amount next year, say?
Oh no, it's gone. Sorry. We are not producing any catalogs now. Yeah. That's it.
It's way often done.
That pot is spent. Yeah. There's no more money to save there. Sorry. I didn't write it. I apologize. Yeah. No, that's it.
Good stuff. All right. Thank you very much.
Okay. Thanks. Okay. Next question, please.
We now have another follow-up from Anne Critchlow of Société Générale. So Anne, please go ahead when you're ready.
Thanks. As you've been going online for about 20 years now or more than 20 years, I'm thinking the average number of orders placed per year must be quite high. So just wondering if you're prepared to give us a frequency number? Thank you.
No, we don't publish that information.
Okay. All right.
Sorry. Okay. And on that slightly disappointing answer, we've come to the end of our questions. Thank you very much for your time today. We actually have got through the presentation in record time. I think 52 minutes today and the questions in record time. So we're either doing something very right or very wrong. Either way, thank you very much for your time this morning. And if you have any follow-up questions, Amanda will be available on the telephone. Okay. That's it. Thank you very much, everyone.
Bye, everyone. Bye.