Sosandar sales soar but investment for growth will widen losses
With much of the news coming out of UK retail at present being gloomy, it's always good to hear about companies that are doing well on the sales front. And one such company is Sosandar. On Monday, the still-small e-tailer issued a trading update and said the most recent quarter was a record one with net revenues of £3.8 million.
But even though sales are soaring, the company is having to invest heavily and this means it also issued a profit warning. “Given the upfront cost of acquiring new customers against the benefit over the lifetime of the customer, the company expects this investment to result in the net loss for the full year being higher than previously anticipated with the increased benefit to be experienced in future years,” it said.
That announcement was perhaps unsurprising coming from an early-stage company and clearly its investment in sales growth is yielding results so is an understandable focus for the firm.
The company saw steady progress in performance month-on-month, with October revenues up 108%, November up 138% and December up 153% year-on-year. The momentum has also continued since then, with January tracking up over 160%, and repeat-order performance “exceeding that in the highly successful autumn/winter period”.
The strong result in the final three months of last year also means that its full-year revenue is on track to be ahead of market expectations.
The online womenswear brand targets a wide age range but particularly a slightly older customer with a strong interest in high-quality, trend-led-but-wearable mid-market pieces. And this is a market that has often been neglected.
It’s also a market that has huge potential and it said Monday that autumn was a very strong period for it with this continuing into the winter. Net revenues during each of the last three months exceeded £1.2 million and the final revenue figure represented a 136% increase year-on-year. That meant Q3 revenue significantly exceeded the whole of the first half.
So how did it achieve this? Well, we always have to take into account that the company being so small means that explosive growth of this kind is more likely to be seen than at a company with a much more mature business. But of course, success isn't guaranteed for small companies and this one is clearly doing something right.
It said its sales rise was driven through product range expansion and increased TV investment after a successful September trial. The performance of TV “was especially pleasing given this is a peak period where competition is high and cut-through can be difficult”.
Following the increased investment in customer acquisition, it saw substantial growth in its active customer database, which now stands at over 110,000, an increase of 93% year-on-year, and 47% quarter-on-quarter. Repeat orders in the quarter also increased 140% to 51,320.
It also said the average order value of £101.97 in the most recent quarter was an increase on H1, although this was largely reflecting the cold weather driving sales of higher-price-point items.
Overall, the number of orders rose 140% to 84,304 and the conversion rate of 2.72% was “a strong result given the level of traffic generated from TV advertising”.
Sosandar also said the increasing data in the business shows that its customers' tendency to repeat-order is “driving strong growth in lifetime revenues”. And it added that as its product is “designed to suit women of all ages, therefore this growth is expected to continue as they remain engaged with the brand across many years”.
Joint CEOs Ali Hall and Julie Lavington said: “The opportunity we identified appears to be bigger that we first thought, with the success of new product areas helping to drive repeat purchases, increasing the potential for future ranges. This has been enhanced by the successful trial in TV advertising which, combined with the already established channels of social, direct mail and PR, expands our ability to attract more new customers than originally anticipated”.
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