As John Lewis Partnership unveils its full-year resuts, Retail Week looks back at the strategy outlined late last year by chair Dame Sharon White to transform the business. Will it work?

Dame Sharon White’s big strategy was unveiled in October last year and and sets out her plan to grow John Lewis Partnership’s profits to £400m in five year.

The retailer will invest in digital, virtual and delivery capabilities in order to reach more customers around the UK, including through an extension of services. 

It has committed £1bn to accelerate its online business and overhaul its shops to drive better customer experience, using funds saved from streamlining its head office and operations. It will expand its delivery capacity for Waitrose to over 250,000 per week, with 25% of those orders reserved for the vulnerable. It will also continue its partnerships with Deliveroo and others to offer more delivery options.

White also plans to highlight the value both Waitrose and John Lewis offer customers for the high quality goods, introducing more affordable price points on some of John Lewis’ homewares.

John Lewis will retain its ‘Never Knowingly Undersold’ price pledge for the time being, while it researches a “new value pledge”.

Meanwhile, White expects 40% of JLP’s profits to come from new areas by 2030. This includes financial services, housing - it has already identified 20 sites where it could build homes, which it would decorate using John Lewis product and even deliver Waitrose food to - and product rental and resale.

White said: “We’ve seen five years of change in the past five months and Waitrose and John Lewis have responded with great agility. Our plan means the John Lewis Partnership will thrive for the next century, as it has the last.” 

Much needed change

Covid-19 has made life challenging for the partnership, however, it has merely exacerbated some existing problems at the business.

Last year, JLP disclosed a first-half loss of £55m. It was only the second time that the business had plunged into the red – the first was last year when the partnership losses were at a similar level.

JLP sales and profits

Restoring the partnership’s commercial health, in particular, that of the department stores will depend on the strategic choices made by White, the former Ofcom boss who took the helm earlier this year.

The legendary institution confronted challenges ranging from questions over the relevance of department stores in general to what many saw as a cack-handed restructuring under former chair Sir Charlie Mayfield that left its two trading divisions leaderless. 

At the time of the restructure, John Lewis was flailing as it sought to carve out a position in a changing department store landscape and Waitrose, which had generally fared better, was preparing for divorce from long-term online partner Ocado.

Many of the partnership’s most experienced senior staff were made redundant and in the aftermath of that, the pandemic brought new challenges, the likes of which had not been experienced in living memory.

White’s plan 

White has already abandoned some of the changes made by her predecessor. New dedicated bosses for John Lewis and Waitrose – restructuring specialist and former Co-op director Pippa Wicks and ex-Sainsbury’s buying director James Bailey respectively – have been appointed. 

There are five areas of strategic focus:

  1. The business will remain “driven by purpose”
  2. Simplify how the business works
  3. Strengthen retail by becoming more convenient and enhancing appeal to the “next generation”
  4. Expand the services offer
  5. Strike partnerships to power growth, such as its recent tie-up with Fat Llama to pilot furniture rental

White envisages a digital-first business, in which John Lewis generates 60% of sales online versus 40% pre-Covid, with Waitrose’s online operations to account for more like 20%, compared with 5%.

There will be a focus at John Lewis on the home and nursery categories (traditional strengths) and the addition of new services, which may range from horticulture to private rented housing – for instance, converting space above stores. The retailer already does that in some locations, as do other retailers such as Sainsbury’s.

And, while White said in July during a broad-brush overview of her plans that there should be “green shoots” within nine to 12 months, profit recovery is three to five years away.

Some of the business shifts she anticipates and wants to drive were already evident in the first-half results, such as the creation of partnerships and new services such as virtual styling.

But much more remains to be done, some of it at the most fundamental level.

Rediscovering its entrepreneurial spirit

First and foremost, former John Lewis Partnership senior staff members and managers have told Retail Week that White needs to restore the business’ mojo.

“It had lost its nerve,” says one.  “It needs to find its entrepreneurial spirit again,” says another. 

Such terms might surprise some, who see JLP as essentially quite a conservative business – after all, it closed on Mondays right up until the mid-1980s – but it has a strong track record in innovation. 

John Lewis Christmas ads are pioneering

John Lewis Christmas ads are pioneering

From the pioneering Christmas ads at the department store business to tie-ups at Waitrose with avant-garde chef Heston Blumenthal, through to a focus on experiential retail – derailed by Covid – or free coffees for customers, it has constantly brought new ideas.

Despite the interm loss reported, there was welcome evidence of innovation and entrepreneurialism. 

Waitrose’s partnership with Deliveroo may have been precipitated by the pandemic, but characterised a willingness to adapt.

A relaunch of the Essential Waitrose range has resulted in a 9% year-on-year sales uplift.

At John Lewis department stores, the reinvention of in-store services online enabled the retailer to host more than 3,000 virtual appointments in areas such as home design and personal styling. 

And the transfer of 1,800 John Lewis staff to Waitrose to help deal with the surge of food shopping during the height of the pandemic is also likely to open minds to new ways of doing business, as well as bring the two brands closer – important because synergies, cost control and cross-pollination remain central to strategy.

Balancing two brands and one business

That focus on synergies from common ownership, central to Mayfield’s vision and still a foundation of White’s plans, makes intellectual sense, but the two brands are very different. 

Some former managers believe White should ensure that the differences between, and the dynamics of, each division must be recognised and that it will benefit the business to do so.

Many customers of each business are unaware of the link between the two and internal research has previously shown that many do not care.

“It’s better to let the two brands be what they need to be. You have to recognise what the two brands need to do for their core customers – that’s the starting point”

Former senior manager

The group’s partnership status matters massively to those that work there but many consumers are indifferent to it – a mindset that calls into doubt the value of the rebrand a few years back of each business to ‘& Partners’.

New JLP logos

Both John Lewis and Waitrose rebranded to include ’& Partners’

In the past, the independent mindset of each business could make things difficult – central decision making could be bureaucratic because of the need to be seen to take account of the views of each.

But the opportunities and challenges facing the department stores and the grocery arm are different – evident in the divergence in performance between Waitrose and the department stores in recent times.

One former senior manager says: “It’s better to let the two brands be what they need to be. You have to recognise what the two brands need to do for their core customers – that’s the starting point.”

Waitrose starts in a stronger place than John Lewis – it is opening new space and focusing on building online following the split with Ocado, and has already achieved annualised online sales of £1bn earlier than targeted.

So White needs to find answers to a question that has foxed many of her peers: what should a department store be these days?

The biggest challenge – how to revive the department store

The traditional department store model has been upended by the rise of online shopping, which has brought an incomparable assortment that once would have been the format’s differentiator to everyone at the tap of a phone.

John Lewis faces difficulties in basic retail disciplines and categories such as home, which it must address, say some former senior staffers.

One says: “When it [John Lewis] was working, it was growing market share. Product, price, service – that’s how you grow market share, and they have to drive that top line again.”

Another maintains: “Home was always a great strength of John Lewis. You have to ask: has enough been done to develop product?”

But fundamentally it needs to find a new place in the world and work out the right relationship between stores and online. 

JL sales and profits

John Lewis was early into multichannel, and a more recent focus on experiential shopping was designed to make the most of its bricks-and-mortar estate.

However, the accelerated pace of change means pressure remains on multichannel, while the pandemic has thrown doubt on the long-term appeal of that sort of experiential retail. 

One former director asks whether John Lewis should adopt more of a marketplace position online, fulfilling the longstanding role of department stores in a digital way.

It is an option that Next has pursued with success by selling other labels and through its Total Platform service for other businesses.

The extent of the online shift was evident in John Lewis’s revelation that it had cut the book value of its store estate by £470m.

The retailer said late last year: “Before the crisis, we believed that shops contributed around £6 of every £10 spent online. We now think that figure is, on average, around £3.”

JL online sales

Bringing magic back to stores

GlobalData managing director Neil Saunders observes: “John Lewis is more advanced in digital, but investment is still needed to improve the online experience. The bigger challenge, however, is how to make physical department stores work. 

“White has already taken some radical steps in getting rid of underperforming branches. This was probably a necessary decision to protect the business, but it doesn’t answer the question as to why those branches were not pulling in enough shoppers nor generating sufficient sales.

“That is a much bigger issue and is something that arguably needs to be addressed across the whole estate. 

John Lewis Leeds staircase

Eight John Lewis stores did not reopen post-lockdown 

“John Lewis shops look nice and they are smart, but they have lost some of the excitement and wonder that is needed to persuade shoppers to visit. Putting that magic back is hard, but it is vital.”

“The biggest challenge the department stores face is that John Lewis’s biggest competitive edge is customer service – the progressive and rapid move online is diluting it”

Richard Hyman, retail analyst

Retail analyst Richard Hyman believes a focus on execution and service must be at the heart of any hopes to transform the fortunes of the department stores.

He maintains: “The biggest challenge the department stores face is that John Lewis’s biggest competitive edge is customer service. Everything else comes second. And it has not succeeded in transferring that online – the progressive and rapid move online is diluting it.”

John Lewis needs to concentrate on selling better and selling more, he argues. 

“There are too many product options that turn far too slowly,” he believes. “How are they going to sell more product through stores, or make more money from online, which is generally a less profitable channel?”

Another former staffer said they find it frustrating that some fashion brands that feel outmoded are still stocked in John Lewis stores when a new generation of brands gaining popularity online could be adopted. “All these lovely independent brands – you never see them in John Lewis and you think, why not?’

Eight John Lewis stores did not reopen post-lockdown, and the changing dynamics raise questions over the future of the estate. “It’s very clear that there’s too much John Lewis space,” one person says. 

“The big call is about right-sizing John Lewis and fundamental thought about what the assortment should be in a digital age. Rather than trying to protect physical space, you need to adapt, which an online marketplace model might enable.” 

Decide on price positioning

The rise of online has also brought questions about pricing, and the advantages and disadvantages of John Lewis’ Never Knowingly Undersold pledge. There are already anomalies – it does not apply to pureplay competitors, nor at Waitrose.  White has said today that the business is researching a new value pledge.

Never Knowingly Undersold at John Lewis

Never Knowingly Undersold at John Lewis

Never Knowingly Undersold has been blamed for the financial toll on John Lewis in recent years as other department store groups launched near-permanent promotions as they battled to survive.

The very fact that the internet has brought unparalleled price transparency, and the retailer’s reputation for honest pricing leads experts to believe White is right to maintain a value pledge at the partnership.

“I would keep it, or something like it, as a cornerstone of value,” a former JLP executive says. 

White has said that the famous slogan “needs modernising and refreshing”, but that any change would retain a value-for-money aspect as part of a “brand standpoint”.

Is her plan enough?

So far, White has impressed many in the industry, who think she is doing the right things for the partnership.

One former partner, who held a senior role, says: “Change was needed, but [Mayfield] took a sledgehammer to crack a nut and there didn’t seem to be any big ideas. Sharon White has shaken things up, and people are pleased that there’s someone in charge. I really hope it gets through this and they don’t lose the specialness.”

Hyman believes the challenge facing White is daunting. He says John Lewis is “firmly on the back foot” and in five years, he fears, “it’s going to be smaller”. “They’ll need to shut more stores,” he thinks.

“John Spedan Lewis always saw the business as experimental and innovative. Sharon White is continuing his tradition”

Neil Saunders, GlobalData

But Saunders is encouraged so far. He says: “The flex into services is interesting as this is an area of reasonable growth, which can be more margin-rich than traditional retail. 

“Some of the ideas are sensible extensions. Other suggestions, such as rented housing, are more radical and take the partnership well outside of its traditional comfort zone. But we all talk about repurposing excess retail to residential, so why shouldn’t the partnership be one of the companies to make that happen?”

Saunders concludes: “She is not a business-as-usual type chairperson, so is exactly what the partnership needs right now. There will certainly be criticism for making waves and trying new things. But the partnership was founded on being radical. 

“John Spedan Lewis always saw the business as experimental and innovative. Sharon White is continuing his tradition.”

As retail is racked by changing shoppers’ behaviour and the ongoing pandemic, experimentation and innovation will be the only way to salvage the department store if it is to survive as a fixture both online and on the high street.