One of the most striking aspects of today’s strategy update from the John Lewis Partnership was the extent to which the retailer is staking its future on what strategy director Nina Bhatia termed “non-retail”.

The group, owner of the Waitrose grocery business as well as the eponymous department store chain, aims to generate 40% of profits from new areas by 2030. Much of that is expected to come from services ranging from housing provision to financial services – the business is investing £100m in the latter alone over five years with the intention of growing it fourfold.

It is not that retail does not matter. The overall umbrella under which the plans are gathered is the ambition of creating “retail customers love” and there are plenty of initiatives in progress at the two core retail businesses.

“Success cannot be taken for granted. Other retailers have made big plays in financial services before and success has proved elusive”

The interest in services reflects the opportunity to build on the retail proposition and the values for which the partnership is famous, such as high standards of service, to push into “areas where we are trusted and can fulfil customers’ needs by making a difference to their lives and the planet”.

That direction of travel makes sense, especially as online continues to reshape the retail landscape. At the John Lewis department store business, for instance, the expectation is that it will be “a 60-70% online retailer by 2025”.

That means it has to up the ante in store but, when so much commoditised product can be bought from so many ecommerce sites, it also means it needs to leverage strengths such as being a source of trusted advice.

The cornerstone

Greater focus on services is not a leap into the dark for John Lewis. It already operates to some extent in all the services categories it intends to build further. But success cannot be taken for granted. Other retailers have made big plays in financial services before and success has proved elusive. Tesco’s bank, for instance, lost £155m in its first half. Its grocery rival Sainsbury’s has challenges of its own within its banking arm, while income from Marks & Spencer’s financial services division also fell last year.

That is not to say that John Lewis cannot succeed. It is taking a sensible approach by linking with expert partners such as Munich Re in insurance and BNP Paribas in customer credit rather than, for instance, launching its own bank.

But success will surely depend on the restoration of its retail prowess – or rather, that of the department stores in particular – because that is the cornerstone upon which everything else will ultimately be supported.

“New services without doubt represent a big opportunity worth pursuing. But some of the basics at the retail business need to be urgently fixed first”

One of John Lewis’ foundations, its excellence of service, is acknowledged to need work. How often do you hear someone say they visited a John Lewis store only to be shown or invited to browse the website? 

Catherine Shuttleworth, founder of retail marketing specialist Savvy, observes: “I’ve always found it easy to shop with John Lewis until this year as there are massive out-of-stocks and a huge lack of customer service. They used to be spectacular at the latter – you could call a store, speak to someone who was an expert in their department and get real quality help or they would send you the product. Now you can’t talk to anyone and their competitors outshine them.”

John Lewis admitted today: “First-class customer service delivered by partners is our unique strength. We know it’s not always been as easy as it should be to shop with us, so we’re first investing to deliver a fantastic experience – online, on the phone and in-store.”

Laying foundations

The in-store experience is vital to John Lewis’ success – past, present and future – and plays a key part in its multichannel appeal. That is clear from the partnership’s plans to invest £1bn, split 50/50 between improving stores and developing online, over the course of chair Dame Sharon White’s five-year plan.

New services are currently an ambition and without doubt, represent a big opportunity worth pursuing. But some of the basics at the retail business need to be urgently fixed first. 

There are some encouraging signs, evidenced by “positive trading momentum”, and the group is rightly focusing attention over the next two years on profit recovery and laying the foundations for growth. Then will come the drive to “accelerate change, reshape and grow”.

The plan was described as “ambitious and achievable”. It is also measurable – the target is profits of £200m by the end of year two and £400m by the end of year five. 

As White said: “Today is the day we get on with the job.”