TOP OF THE SHOPS?

Fol­low­ing a se­ries of news sto­ries high­light­ing is­sues such as job cuts and pay­ments be­low the min­i­mum wage, is the shine com­ing off John Lewis? Or is this sim­ply a read­just­ment process that any ma­jor re­tailer might have to en­dure to emerge stronger? By J

Campaign UK - - FRONT PAGE -

Re­cent neg­a­tive head­lines threaten to tar­nish John Lewis’ rep­u­ta­tion as the jewel in UK re­tail­ing’s crown

John Lewis has al­ways been to UK re­tail­ing what the ravens are to the Tower of Lon­don. Le­gend has it that Bri­tain will fall should the birds ever leave. And the retail in­dus­try would cer­tainly seem a life­less place if John Lewis wasn’t at its heart.

Adored by gen­er­a­tions of mid­dle­class shop­pers for com­bin­ing qual­ity prod­ucts with ex­em­plary cus­tomer ser­vice, the or­gan­i­sa­tion has long been cited by ex­perts as a text­book ex­am­ple of suc­cess­ful brand-build­ing.

John Lewis was the high-street brand that even the debt cri­sis couldn’t de­rail. Re­cent events, though, have sug­gested the John Lewis Part­ner­ship – which en­com­passes John Lewis depart­ment stores and the Waitrose su­per­mar­ket chain – isn’t im­mune from the fe­ro­ciously com­pet­i­tive mar­ket in which it op­er­ates.

This year, the com­pany an­nounced the ax­ing of 387 jobs and slashed an­nual staff bonuses to their low­est level since 1954 as it warned of “volatile and un­cer­tain” trad­ing con­di­tions ahead.

As if that wasn’t enough for a group founded on eth­i­cal busi­ness prin­ci­ples, it was dis­cov­ered to have been pay­ing some staff less than the min­i­mum wage.

And, per­haps most se­ri­ous of all, the com­pany stood ac­cused of break­ing its most sa­cred tenet and fa­mous ad­ver­tis­ing strapline: “Never know­ingly un­der­sold.”

Not that the busi­ness is at panic sta­tions. John Lewis and Waitrose both in­creased their mar­ket share last year; the group is fi­nan­cially strong and has a re­la­tion­ship with its cus­tomers that ri­vals would kill for.

“You have to make a dis­tinc­tion be­tween pay­ing less than the min­i­mum wage – a per­pet­ual prob­lem for a low­mar­gin and labour-in­ten­sive in­dus­try like retail – and other is­sues like re­duc­ing staff bonuses that al­low John Lewis to make heavy in­vest­ments in tech­nol­ogy,” a source close to the com­pany ex­plains. “That’s the sign of a grownup man­age­ment think­ing about the fu­ture.”

Craig Inglis (pic­tured, op­po­site), John Lewis’ cus­tomer di­rec­tor, sees re­cent events as a re­al­ity check. “Th­ese is­sues go to the heart of what we are and we don’t take them lightly,” he says. “But we don’t see any signs of dam­age to the brand at this point.”

Nev­er­the­less, the tests that lie ahead are sig­nif­i­cant. Rana Brightman, strat­egy di­rec­tor at brand­ing spe­cial­ist Siegel & Gale, says: “What we’re see­ing is a busi­ness in flux as it tries to be­come rel­e­vant in to­day’s world.”

Richard Hy­man, one of Bri­tain’s lead­ing retail an­a­lysts, goes fur­ther: “I would say the John Lewis brand is not only tar­nished but is be­ing chal­lenged. The re­cent neg­a­tive PR is just an­other source of pres­sure.”

In one sense, John Lewis is just an­other vic­tim of a fear­some trad­ing en­vi­ron­ment. Just ask Marks & Spencer, which, as one an­a­lyst points out, “fishes in John Lewis’ pool to a large de­gree” and which saw its prof­its plum­met by 64% in the year to April.

John Lewis must un­dergo its cathar­sis against a back­drop of mo­men­tous change. “It’s an un­prece­dented time in UK retail and it’s go­ing to last be­tween three and five years,” Hy­man warns. “There will be a mas­sive shake-out be­cause there are too many mouths to feed. We’ll see a re­de­fined global retail land­scape.”

“None of us knows what will hap­pen,” Inglis ad­mits. “What we do know is that in­creas­ing com­pe­ti­tion will lead to con­sol­i­da­tion and that it’s vi­tal for us to re­main im­por­tant to our cus­tomers.”

In adapt­ing to this chang­ing en­vi­ron­ment, many be­lieve the most se­ri­ous is­sue con­fronting John Lewis will be one that has al­ways been key to main­tain­ing the trust of its cus­tomers: the price pledge. In­tro­duced by John Lewis Part­ner­ship founder John Spedan Lewis in 1920, it is the cor­ner­stone of the group’s busi­ness phi­los­o­phy. So it came as a shock when the depart­ment store was car­peted by the Ad­ver­tis­ing Stan­dards Au­thor­ity in March for pulling an Ap­ple Watch of­fer from its web­site so that it was not forced to match a ri­val’s pro­mo­tion.

“John Spedan Lewis was very short­sighted,” Hy­man quips. “He didn’t fore­see the in­ter­net. Fool­ish chap!” Brightman adds: “John Lewis has over-egged the price pledge, which has al­ways been based on prices at other stores, not on other web­sites.”

John Lewis’ dilemma is that it has made a pledge it dare not aban­don but which is in­creas­ingly hard to de­liver. “It just shows the ex­tent to which tech­nol­ogy is dis­rupt­ing the retail sec­tor,” Brightman sug­gests.

Is the price prom­ise sus­tain­able? “It’s a prin­ci­ple set so deeply in stone at John Lewis that any sug­ges­tion of ad­just­ing it would be seen as hereti­cal,” Hy­man de­clares.

John Lewis’ com­mit­ment to keep­ing the pledge is re­flected in its ded­i­cated team faced with the Her­culean task of check­ing thou­sands of ri­vals’ prices daily. “‘Never know­ingly un­der­sold’ has never been more rel­e­vant be­cause

“What we’re see­ing is a busi­ness in flux as it tries to be­come rel­e­vant in to­day’s world” Rana Brightman, strat­egy di­rec­tor, Siegel & Gale

it un­der­pins cus­tomers’ trust in our brand,” Inglis in­sists. “We’ll never step away from this on my watch.”

The in­ter­net’s im­pact on the pledge is just part of the chal­lenge John Lewis faces as on­line sales start out­strip­ping those at its stores. On­line ac­counted for 36% of the busi­ness last year and is ex­pected to rise to 50% by 2020.

Steven Sharp, who led trans­for­ma­tional cam­paigns as Marks & Spencer’s mar­ket­ing di­rec­tor be­fore found­ing mar­ket­ing and retail con­sul­tancy Imag­i­neer Lon­don, be­lieves John Lewis has some sig­nif­i­cant ad­van­tages as it moves fur­ther into on­line ter­ri­tory.

“If you’re buy­ing some­thing for your bath­room on­line, you might look at Ama­zon and ebay, but you’re most likely to get it from John Lewis if the price is right be­cause you have con­fi­dence in the brand,” he says. “And you also know it’s not go­ing to be de­liv­ered by a scruffy geezer in an old white van.”

Brightman, though, claims the John Lewis web­site lacks slick­ness. That’s a po­ten­tial prob­lem when it comes to estab­lish­ing re­la­tion­ships with peo­ple who only want to en­gage via a mo­bile or lap­top.

“The co­nun­drum for John Lewis is that, as it grows its on­line busi­ness, its abil­ity to con­tinue de­liv­er­ing out­stand­ing cus­tomer ser­vice is re­duced,” Hy­man ex­plains.

Inglis ar­gues that this isn’t an “ei­ther/or” sit­u­a­tion. “Two-thirds of our cus­tomers are shop­ping across all our chan­nels,” he says. “The com­ing to­gether of our web­site, which works bril­liantly along­side our 48 stores, as well as the ‘click and col­lect’ ad­van­tage that Waitrose of­fers, boosts our fu­ture ex­pec­ta­tions.”

That’s just as well, given how sig­nif­i­cantly shop­pers’ habits are chang­ing. “Peo­ple aren’t vis­it­ing stores just to buy stuff any longer,” Sharp says. “You have to of­fer them ex­pe­ri­ences like restau­rants and beauty par­lours.”

Hy­man says ex­pe­ri­ence-re­lated ser­vices are vi­tal to groups such as John Lewis. They make stores more at­trac­tive to visit and de­fray the ris­ing costs of store sales. “The group un­der­stands it has to do this but needs to be care­ful,” an in­dus­try source warns. “Shop­ping at John Lewis is a serene ex­pe­ri­ence. It isn’t Sel­fridges.”

Inglis points to around 500 in-store events that will take place dur­ing the sum­mer – in­clud­ing yoga ses­sions, fra­grance work­shops and even box­ing classes – as ev­i­dence that the group is think­ing and act­ing.

At the same time, John Lewis is aim­ing to boost its range of ex­clu­sive prod­ucts from 30% to 50% to cre­ate what Inglis calls “a more holis­tic propo­si­tion” for cus­tomers.

More­over, 15 Kuoni travel agen­cies op­er­ate within John Lewis out­lets, while 171,000 peo­ple vis­ited the roof gar­den – com­plete with pub – atop the Ox­ford Street flag­ship store last year.

“Shops aren’t show­rooms be­cause that sug­gests a hands-off re­la­tion­ship,” Inglis says. “Do th­ese ex­tra things bril­liantly and you pro­vide peo­ple with a day out.”

Sources say a by-prod­uct of John Lewis’ “click and col­lect” of­fer­ing has been to draw more peo­ple into its out­lets, and Brightman be­lieves store sales could be boosted by giv­ing em­ploy­ees the tech­nol­ogy to make them more use­ful to cus­tomers.

John Lewis has al­ready latched on to this, hav­ing an­nounced an £8m pro­gramme to equip staff with iphones. The aim is to en­sure they main­tain their rep­u­ta­tion for prod­uct knowl­edge sur­pass­ing that of even their highly knowl­edge­able cus­tomers while be­ing able to check a prod­uct’s avail­abil­ity in­stantly.

Hy­man sug­gests John Lewis and oth­ers could take their cue from the beauty de­part­ments, where staff are em­ployed by the cos­metic com­pa­nies whose prod­ucts they sell.

“The anec­do­tal ev­i­dence is that while other store de­part­ments are hav­ing a hard time, their well-staffed beauty coun­ters have not been un­der the same pres­sure,” he says. “That’s be­cause those staff are not only there to sell but of­fer a high level of cus­tomer en­gage­ment.”

With Adam & EVE/DDB, John Lewis’ ad agency, well ad­vanced in the process of cre­at­ing the brand’s al­ways ea­gerly an­tic­i­pated Christ­mas block­buster, some may ques­tion whether this ap­proach ought to be dropped in favour of a year-round pres­ence.

The agency isn’t com­ment­ing, al­though Inglis is adamant that the sea­sonal ex­trav­a­ganza will not be aban­doned. Lit­tle won­der when 40% of John Lewis’ prof­its are made dur­ing the five weeks be­fore Christ­mas.

“We have a con­sis­tent ad­ver­tis­ing pres­ence through­out the year, which doesn’t make the head­lines but which is still im­por­tant,” Inglis adds. “What I’d like is for us to ex­tend more of the cut-through we get at Christ­mas into other times.”

Whether or not that can be achieved is as de­bat­able as whether the long­time jewel in the crown of Bri­tish re­tail­ing is see­ing its own crown slip. But as Sharp ob­serves: “At least it’s still wear­ing one.”

“As John Lewis grows its on­line busi­ness, its abil­ity to con­tinue de­liv­er­ing out­stand­ing cus­tomer ser­vice is re­duced” Richard Hy­man, retail an­a­lyst

Roof gar­den: ex­pe­ri­ence-re­lated ser­vices make stores more at­trac­tive to vis­i­tors

Christ­mas ad­ver­tis­ing: John Lewis’ fes­tive cam­paigns, cre­ated by Adam & EVE/DDB, have be­come an ea­gerly an­tic­i­pated block­buster event

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