The John Lewis Partnership yesterday confirmed recent reports that it plans to integrate its two retail businesses so it can reduce costs and improve its offer to survive the brutal trading conditions.
The group’s new ‘Future Partnership’ plan includes the introduction of a new management structure. From next year, there will be one Executive Team comprised of seven new director roles with responsibility for the performance and strategy of the whole business. This will be headed by the group’s new incoming Chairman Sharon White.
As a result, there will no longer be divisional boards or separate Managing Directors for the John Lewis and Waitrose businesses. This led to the announcement yesterday that Waitrose Managing Director Rob Collins will step down in January, with the executive saying there was not a role in the new structure that he believed would be right for him.
Due to the creation of new cross-Partnership roles and the greater integration of the two brands, the group stated that there will be a reduction of around 75 senior management head office roles from the current total of 225. Analysts suggested the restructure could lead to the closure or downsizing of one of its two head offices – in London’s Victoria and Bracknell.
Among the new roles created, Paula Nickolds, currently Managing Director of the John Lewis divivision, will become Executive Director, Brand; responsible for Digital, Marketing and Services across the Partnership.
Operations across both brands will be led by Andrew Murphy, currently director of IT and transformation for the group, and Patrick Lewis will continue as finance director. Bérangère Michel will head customer service and Tracey Killen will head people management. Meanwhile, two new directors – for trading and strategy – are being sought.
The company said its new structure, which will come into effect from 3 February 2020, would enable it to speed up the roll-out of better products and services, develop and set strategy across both its brands in one place, speed up decision-making and make internal and customer service systems more efficient. The group also wants to develop shared IT and supply chain platforms.
Taken together, all aspects of the plan are expected to lead to an overall cost saving of around £100m over time.
Sir Charlie Mayfield, Chairman of the John Lewis Partnership, said: “Our current structure has served us well in the past, enabling us to develop two of the UK’s most loved and trusted brands. In the last three years we have delivered significant innovation and driven efficiency, maintaining market leading service standards and growing customer numbers.
“However, the lesson of the last two years is that we need more innovation, faster decision making and bolder steps to align our operating model with our strategy. This is what the ‘Future Partnership’ is all about.”
He stated that there will be considerable change in many areas of the Partnership as it brings the two businesses closer together. “These are necessary and these changes will be difficult for some of our Partners and we will implement as carefully and sensitively as we can,” he said.
The shake-up comes just weeks after the Partnership posted its first-ever half-year loss and warned that a no-deal Brexit will have a “significant” impact on the business.
Commenting on the Partnership’s plan, Richard Lim, CEO of Retail Economics, said: “This is an extremely bold move. The merging of both businesses signals a single-minded focus on delivering cost-saving efficiencies, improving productivity and creating a harmonised proposition to leverage value from their customer base.
“Against a backdrop of rising costs and fiercer competition, a new leaner and flexible operating model will help restore profitability during a period of rapid change within the sector.”
Meanwhile, Thomas Brereton, retail analyst at GlobalData, warned the changes would have to be implemented carefully to avoid disruption, adding: “The long-term impact of running a unified strategy for two retailers with such a varied proposition is questionable, and the creation of new roles – particularly Paula Nickolds change from John Lewis MD to Brand Executive Director – may cause initial disorientation.”
NAM Implications:
- Some reduction in costs…
- …but real issue will be possible downsides re combining two completely different retail business models…
- …in order to optimise each…
- Watch this space…
