Q: Is John Lewis’ big shake up the right move for the Partnership?
A: For many years, John Lewis set a gold standard in retailing. Few could match them for quality, value, presentation and service – attributes that were transferred to food shopping when creating Waitrose.
Recently, however, that tried and tested formula has let the Partnership down, their chain of modern department stores turning from a strength to a weakness.
Although John Lewis was an early entrant into online shopping, it has not been enough to compensate for the drop in high street footfall, especially since Covid changed the way we shop. Just recently, it axed a further 1,500 jobs to help restore profitability.
A couple of years ago, I had the privilege of joining a John Lewis senior conference, where I met a group of personable and highly impressive managers. They were keen to arrest the recent slide in performance and reverse the consequent drop in the partners’ annual bonus. They were using professional marketing and central management techniques to strengthen daily performance, when perhaps the partners on the shop floor knew something more innovative was needed.
Like the third generation of a family firm, it’s difficult to match the success of your predecessor. Founder John Spedan Lewis was spectacularly successful because he created a brand new way of doing business. Woolworths, Littlewoods, Radio Rentals and, indeed, Marks & Spencer all hit a wall because they didn’t continue to evolve. During challenging times, businesses have to keep changing to stay relevant. The current master chameleon is Simon Wolfson of Next, who keeps one step ahead of events.
I was somewhat sceptical when John Lewis appointed a new chair with no retailing experience, but I must admit that Dame Sharon White has an impressive CV, having worked at 10 Downing Street, The World Bank, been permanent secretary at The Treasury and chief executive of Ofcom. She has already realised that John Lewis needs a dramatic change in direction to restore profits, but it remains to be seen whether she can make it work.
At first, Dame Sharon’s initial ideas might have seemed extremely bold, but on mature reflection, they come with a good deal of common sense. Her hope to increase online sales to 60pc of total turnover is in tune with the major change in shopping habits. The intention to derive 40pc of future business from non retail sources shows that she appreciates the business needs to make some dramatic moves to make up for the decline in profit over the past few years.
She is already beginning to put the property plan into practice, with a planning application to convert the upper floors of John Lewis Oxford Street to offices. This isn’t the best time to put new office space on the market, but the move signals a significant change on the high street where we will see the conversion of multi-floor department stores and millions of square feet of other retail space to another purpose – particularly housing.
Abandoning the “never knowingly undersold” slogan is a no brainer. With amazing offers on the internet, regular sale promotions in-store and crazy prices on Black Friday, John Lewis is sure to be undersold somewhere every day of the week. It must be better for the Partnership to concentrate on great service and everyday value rather than looking over its shoulder at B&M Bargains and the latest deep discounts at Debenhams.
Success for Dame Sharon will particularly depend on picking the right direction for her diversification. John Lewis is still a strong brand, with a reputation for quality and reliability that will give some credibility to any new venture, but it won’t be easy to develop £1.5bn of new business.
She desperately needs a bit of luck, with enough of the new ideas providing the promise to build big new chunks of business. If that happens, confidence will return to the Partnership and a restoration of the bonus will not be far away.
In the meantime, however, Covid and the second lockdown will make life even more difficult.
Sir John Timpson is chairman of the high-street services provider, Timpson.
Send him a question at [email protected]