KNOWINGLY OR NOT, BOSSES HAVE MADE SOME BIG MISTAKES
OVER its 150-year history, John Lewis & Partners has taken huge pride in its reputation for fairness. Its Never Knowingly Undersold promise – a commitment to match any competitor’s price – introduced 75 years ago, together with its profit-sharing ownership structure, became bywords for best in class retail practice.
Indeed, with many of its department store rivals including House of Fraser and Debenhams on the skids, John Lewis ought to be splendidly placed to be doing a roaring trade.
But like its cohorts on the high streets and shopping malls, it faces ferocious headwinds.
The partnership’s outgoing chairman Sir Charlie Mayfield blames Brexit uncertainty and a thumping loss of consumer confidence for current and future woes after the group reported an unprecedented first half loss of £25.9million yesterday.
In truth, the problems go far deeper than that. The encroachment of Amazon and pure online players such as AO means John Lewis no longer dominates the white goods and electronics markets. In this new world the Never Knowingly Undersold pledge hangs around the partners neck like an anvil.
The ability of consumers to compare prices is easier than it has ever been with almost every shopper in the country equipped with mobile devices they can take on
their shopping expeditions. As importantly, like that other damaged dowager Marks & Spencer, the partnership allowed a corporate vanity to develop.
It may only have a fraction of the number of stores that M&S possesses but, since the turn of the century, it has expanded out of its Oxford Street flagship to every corner of the country with some 50 department stores and 344 Waitrose outlets ( including smaller neighbourhood stores).
As a result its cost base has increased, its supply lines have become stretched and the specialness of the brand diluted.
Worse still, John Lewis, with its older IT systems, has struggled to match the speedier and efficient logistics demanded by sophisticated online shoppers.
Mayfield and his partners have sought to fight back by improving the service offerings and there have been huge improvements in fashion and beauty. This so far has failed to compensate for the upward pressure on partnership pay, the inequitable burden of high street business rates and the vanishing profit margins as it fights to honour its prices pledge.
Amid the disappointment John Lewis is able to snatch some comfort from the performance of Waitrose in what the company describes as a weak grocery market in which it has managed to limit the decline in same store sales.
HOWEVER, Waitrose also is suffering from the exodus of the middle- class shopper, its core customers, to the fashionable German discounters Lidl and Aldi which offer the best fresh produce at a fraction of the price as well as deeply discounted fine wines, Norwegian smoked salmon and fine German chocolate.
As Ocado’s main grocery partner, Waitrose long had an edge in the online food delivery market.
But it has been forced to develop its own delivery service as Ocado has stocked more produce from northern- based supermarket group Morrisons.
Waitrose soon faces the prospect of being totally frozen out as a result of the £700million direct tie-up between Ocado and M&S.
The big hope for John Lewis and Waitrose loyalists is that the decision to go outside of the cosy partnership structure in its choice of the next chief will provide radical change.
The new boss Sharon White, the current chief executive of telecoms regulator Ofcom, is known as a consumer champion who among other things is bullying BT into improving the nation’s digital infrastructure.
The choice of someone without direct retail experience might be considered foolish. But Miss White potentially has the vision and skills with innovation to recognise that the old John Lewis is in need of radical modernisation.