Sharon White, the Chairman of the John Lewis Partnership, has outlined the initial results of her strategic review aimed at restoring profit growth across its two retail businesses.
In a letter to its Partners (staff), White said the review had looked at how the business was delivering for customers and how it compared to its competitors. The operator of the John Lewis and Waitrose chains gained feedback from more than 10,000 customers and over 100 suppliers.
“As you all know, these are testing times, with profits this year and next likely to be challenged. But the beauty of being a Partnership is that we are able to take a long-term view,” said White.
“The strategic review should see green shoots in our performance over the next 9-12 months, and our profits recovering over the next three to five years.”
The letter outlined a host of areas the group would look to improve and expand into in order to drive growth and realign its estate to current shopping trends.
These included making it easier for its customers to “shop sustainably”, with clearer information about the origins of its products and supply chain.
The group also plans to continue simplifying the business by taking out duplication and cost. It is still targeting at least £100m of savings in head office costs. The group has already reduced the number of senior managers by one third, whilst new technology and expertise from outside suppliers will help with the target.
White stated that the aim was to make savings as early as possible this financial year and next. “These are very difficult decisions and I deeply regret the personal impact on Partners,” she said.
White also highlighted how the pandemic has accelerated the move to digital retailing. The group expects John Lewis to be a 60% online retailer, from 40% pre-Covid-19; and Waitrose to rise above 20%, from 5%.
In both brands, White said it will double down on “making shopping easier and more convenient”. The group will be investing in availability in store and online; useability and personalisation of its apps and websites; better rewards for loyal customers; and more convenient online services such as its click & collect agreement with the Co-op.
JLP also plans to better utilise its estate by making more John Lewis products available in Waitrose stores, and food in John Lewis outlets.
At Waitrose, White stated that there will be even more investment in own brand food so that it stands out further from rivals. This will also mean a more local offer with increased multi-ethnic food.
The expansion of its food delivery services will also continue. Meanwhile, the rebalancing of the Waitrose estate will see new stores opened where there is strong customer demand, and others closed when demand wanes. Waitrose has already announced three rounds of store closures in the past two years, with a total of 17 of its supermarkets shut. An increased push into the convenience market is also expected to form part of its new strategy.
With profit margins under pressure, White said the business needed to expand beyond retail to be sustainable over the long-term. This will see it growing its financial services and horticulture activities. JLP also suggested that vacant department space could be converted into private rented housing. Earlier this month, the group confirmed that eight of its 50 John Lewis stores will close.
“We clearly won’t be able to achieve all this alone,” said White. “So we will create partnerships with other businesses who respect our ethos and can bring resources or capabilities we don’t have.”
Meanwhile, as flagged back in March, she said the business was reviewing the ‘Never Knowingly Undersold’ price promise for its John Lewis chain. For almost 100 years, John Lewis has committed to match its main rival’s price if the same product is found to be cheaper elsewhere. However, the pledge has become more painful to honour as the likes of House of Fraser and Debenhams have slashed prices in a bid to survive and compete with online retailers.
Speaking about next steps, White said: “We need a transformation in the business and the action we take over the next nine to eighteen months will be crucial. As you can see there’s more work to do on detailed planning, but I hope that you get a good sense of our future direction.
“I am very conscious that a strategy – unless it is supported by partners and is well executed – is just another piece of paper. It is how we deliver on the plan and the commitment from all partners that will make the difference.”
The partnership’s executive team plans to begin discussing the proposed strategy with partners in the autumn and will be visiting every site over the course of next year.
White added: “A successful strategy will mean we can invest more in our customers and more in partners. The innovation, commitment and passion of partners gives me total confidence in our success.”
NAM Implications:
- From a NAMs-eye-view the key issues include:
- Waitrose success in transferring their Ocado customers to Waitrose online fulfilment following the switch to M&S.
- The instore impact (partner morale) of reductions to the partner profit share.
- The extent of the switch to private label and its impact on supplier brands.
- Otherwise, business as usual?
