John Lewis boss: Don’t say we’re like Debenhams
As his stores plunge into red, retail giant’s chairman says...
THE chairman of John Lewis has hit out at suggestions that its department stores face a similar fate to ailing rivals Debenhams and House of Fraser – and he has revealed bold plans to ‘move beyond just being a retailer’.
In a rare interview, Sir Charlie Mayfield told The Mail on Sunday it was ‘not acceptable’ that John Lewis Partnership, which includes Waitrose, last week reported a £25.9 million loss for the first half of the year – the first in its 155year history.
But he said the company was in an ‘infinitely better’ position than high street rivals which have been shutting stores, adding: ‘[It] upsets me a bit when people compare us because our department stores are very different.’ Mayfield said John Lewis had stashed away £1 billion of cash over the past five years in anticipation of a downturn, leaving it ready to invest in ‘bold’ new ideas including plastic-free stores and nutritionists to give out dietary advice. ‘What we are tapping into is how much customers want to be good citizens of the world,’ he said. ‘We need to move beyond just being a retailer … [and] get really creative about how we can offer something you can’t get anywhere else.’
THE chairman of John Lewis Partnership, Sir Charlie Mayfield, may be sitting on a grand plan for the retail giant’s future – but the painful experience of last week still smarts. ‘We weren’t expecting bouquets,’ he says, turning over the memory of Thursday morning when the John Lewis to Waitrose group admitted that even it had not been immune to the worsening retail climate.
‘We have to bring a bit of harsh daylight to this – the fact is we made a loss in the first half and that is not acceptable,’ he says.
The past 18 months have seen more household name retail chains collapse than in living memory. The death throes of Debenhams and House of Fraser – both now restructuring under new ownership – have propelled John Lewis into focus as it was forced to discount to match their massive price cuts.
Mayfield pauses, aware those chains have been starved of investment for years, if not decades, while John Lewis invested billions. ‘You won’t be surprised to hear me say that upsets me when people compare us because our department stores are very different.
‘I’m not going to disparage competitors – but I always say to people: Go to a shop. Go and take a walk down Oxford Street [where John Lewis sits in a row with Debenhams and House of Fraser] and have a look – it’s tough times but I’m proud of our shops.’
Mayfield, a former Scots Guard, says John Lewis is in an ‘infinitely better’ position despite the red ink creeping on to the balance sheet. The group had the foresight to row back on spending in good times and now has more than £1 billion cash stockpiled, he says. He still expects to make a clear profit in the fullyear with the annual festive boost to sales still to come.
But he says: ‘We anticipated this. I remember having a meeting in Birmingham back in 2014. We just said, you know what, things are going to get a lot tougher, we need to start conserving cash.’
The John Lewis Partnership business model puts the ownership of the business in the hands of employees – its ‘partners’. Mayfield says there has been increasing awareness that such decisions have been critical amid the historic changes that have hit the high street. But despite a ‘major drive around cost reduction’, it has sought to continue to invest and spend money on try
ing out new ideas. ‘The instinct is that just doing a bit more of what you did before a bit better will be all right on the night. It might be for a year or two, but it won’t be long term. Our strategy needs to be much more bold,’ says Mayfield, who has already agreed a plan to step down next year and hand over his vision to outgoing Ofcom chief executive Sharon White.
Mayfield worked at Smith-Kline Beecham and did a stint at management consultancy McKinsey before joining John Lewis in 2000 as business development director. He was promoted to managing director at the department store in 2004 and-became full-time chairman of the group in 2007 at the age of 40.
‘We have to guard against the notion that it’s going to be OK, profits will rise again, and at that point we can all relax.’ He points out: ‘Amazon will carry on getting bigger and, however good you are at being a retailer, you can bet that in five or six or eight years’ time you’ll be in another trough if you don’t look at other ways of going forward. We need to move beyond just being a retailer. We need to see ourselves as a brand and draw on the full strength of Waitrose and John Lewis and get really creative about how we can offer something you can’t get anywhere else. Then the potential is extraordinary.’
He says new projects such as the packaging-free food store in Oxford which he describes as ‘phenomenal’, is key. ‘What we’re tapping into is how much customers want to be good citizens of the world,’ Mayfield says. ‘The proposition has got to be convenient and it’s got to be good – but the customer’s propensity to embrace things like that if you do them well is huge, absolutely huge.
‘I’m really proud of the Waitrose Unpacked [packaging-free] trial. But we need three or four or five of those things going on at a time – not one a year.’
He also cites its fashion advisory service – in which partners have even been given theatre training to help customer interaction – and another ‘brilliant trial’ employing nutritionists in store as part of his vision for the group’s future.
‘It really opened my eyes. People came i n saying they had a family history of diabetes and they’ve lived every day thinking about it but never done anything. Then you’ve got others who just want to live a healthier life as they get older.
‘So just imagine how many customers are out there who have got those sort of needs. Then just think about the potential for Waitrose and John Lewis.’ He dismisses suggestions that John Lewis should branch out wholesale into financial services: ‘ We’re not just suddenly becoming a bank.’ But he says: ‘I think the partnership has got the financial strength and the sense of long-termism to do that really well. We are going to take some bold steps [soon] which are all about making us more customer focused and organising ourselves in a way to drive more innovation much faster.’
He says he went to Oxford to meet the five-man team responsible for the Waitrose Unpacked trial and asked for an honest view of how easy it was to deliver in a vast organisation like his.
‘They said it was hard – incredibly hard. They had t o be bloody minded. They had to push and break down walls to get this to happen even though we said we wanted it to happen. Let me tell you, taking all the packaging off products means you’re cutting across the way the organisation works in all sorts of ways – health and safety, staff, suppliers.
‘So we need to figure out how we arrange things so that really amazingly bright squads of people like that have got a stronger purchase on the organisation. We put more rocket fuel in them to drive change faster and the rest of the organisation’s job is to be more responsive to that, not to stop it. You have to be realistic. You can’t just click your fingers. But we want people to say, “Yep, that’s what customers want, so we’re going to work it out even though it’s difficult and different. We’re going to figure it out.” ’
A big part of Mayfield’s plan for the company is setting its staff apart from those at other stores – taking advantage of the partner model that some see as a potential drag.
‘Let’s be really clear: this has to be utterly commercial. This isn’t some sort of happy holiday camp. The fact is that a partner has to generate at least 25 per cent more value per i ndividual t han an employee elsewhere – that’s an approximation taking into account the benefits of ownership, the combination of the bonus, the pension, that’s roughly what it adds up to.
‘Some people are surprised by us putting a figure on it because they say, that sounds a bit punchy – it doesn’t sound very partnership. But it’s the only way we are going to succeed.’
We need to move beyond just being a retailer and instead be a brand
We’re tapping into how much customers want to be good citizens of the world