Wednesday, 26 August 2020 13:38

ChicGeek Comment Knowingly Fixing John Lewis

fixing John Lewis Waitrose chic geek expert comment

The department store sector is at a crossroads. It’s do or die time, and a race to right these historical businesses before the whole thing capsizes.

Left - The John Lewis in Birmingham is closing after only 5 years

John Lewis was always seen as a steady ship amongst the losers, like Debenhams and House of Fraser, made unseaworthy with oodles of private equity debt.

But, even John Lewis, the famous cooperative, is suffering in this retail storm. Is it time to batten down the hatches and lose its price matching promise? What can the John Lewis Partnership do to sail through?

John Lewis’ ‘Never Knowingly Undersold’ promise is a left over from a bygone time, much like its ‘Clearance’. Group chair, Sharon White, told the Sunday Times, last Sunday, she expected the price pledge to go. The famous promise to match rivals' prices has become harder to defend as competition from online retailers has become ever tougher and eaten into margins. The slogan is nearly 100 years old having been in place since 1925. "The proposition is important because it signifies being fair to society. We're reviewing it to improve it,” she said.

Pre-COVID, the John Lewis Partnership - John Lewis and its supermarket Waitrose - full year trading update for the 52 weeks ending January 25th showed operating profits dropped by 23 per cent year-on-year to £123 million, while pre-tax profit suffered a 25 per cent year-on-year decline to £146 million. Meanwhile, revenues declined 1.6 per cent year-on-year to £10.15 billion.

While core operating profit at Waitrose grew by £10 million to £213 million, it slumped by £75 million to £40 million reflecting weak sales in home and electricals, investment in technology and higher staff costs.  

fixing John Lewis Waitrose Birmingham chic geek expert comment

The staff bonus - the profits split between its employees -  was two per cent. The lowest amount since 1953 when staff received nothing.

Right - John Lewis' shiny Birmingham store was opened to great fanfare in 2015

Profits were falling at John Lewis’ department stores before COVID 19, and while sales at Waitrose would have increased, it is doubtful it would have made up the difference. So, what’s gone wrong at John Lewis?

Over Expansion - Many people might think John Lewis’ huge retail estate was a legacy leftover from a previous era, but it is worth noting nearly half, 24 of their 50 John Lewis shops, were opened after 2000. They weren’t a traditional legacy retailer and haven’t been afraid to close stores over the years. The Knight & Lee department store in Southsea closed in 2019 after more than 150 years, and was the first to be closed since 2006. John Lewis has announced the closure of a further eight stores including its shiny flagship in Birmingham, above New Street Station, opened only five years ago. This year between 60% and 70% of John Lewis's sales are expected to be online, compared to 40% last year, making a large number of stores harder to justify.

Waitrose has been lightly trimming its 338 store estate announcing the closure of 17 stores since June 2018 and a further three Waitrose stores are to go, at Helensburgh in Scotland, Four Oaks in the West Midlands, and Waterlooville near Portsmouth, later this year.

The company has said they were exploring whether excess shop estate could be used for new mixed-use affordable housing. White said she is talking to developers and investors about partnering to build flats, many of them affordable, on top of existing shops, starting in west London.

John Lewis has announced selling more Waitrose food in their department stores which would make good use of excess space and fill the in-town convenience many other food retailers offer as long as the opening hours are extended.

Lack of Convenience - As people shunned town centres and shopped local, Waitrose & Partners lack of convenience stores has become more prominent. Out of its 338 shops, across the UK, just 65 are "little Waitrose" convenience shops. In comparison, Tesco operates 153 Metro stores and more than 1,700 Express outlets. Sainsbury's Convenience Stores Limited (trading as Sainsbury's Local) is a chain of 770 convenience shops operated by the UK's second largest supermarket chain Sainsbury’s.

Waitrose has a 5.1% share of the food market, making it the eighth-largest retailer of groceries in the UK. These convenience stores can charge more for their restricted selection of products and would make Waitrose, perceived as more expensive by many, more competitive on pricing.

White told John Lewis staff, "We are looking at how we make our products available through other routes, reflecting the fact that Waitrose has a smaller presence in the convenience market than other supermarkets.”

Waitrose needs to extend its opening hours. Many close at 9pm which feels early in today’s competitive supermarket landscape.

Too Much Focus On Fashion - White told the Sunday Times the chain needed "more inspiration, surprise, fun" and that it would compete by "curating" items in store better. John Lewis would focus less on women's fashion and get rid of travel and spa services. Instead it would offer more financial, home and garden products.

John Lewis made a big push into the fickle and highly competitive world of fashion a few years ago, and, while it was the correct place for expansion at the time, it has taken focus away from its core home and electricals. During lockdown people have re-evaluated their homes and want to spend the money they would have spent on holidays and fashion on their surroundings.

It is worth noting that online electrical retailer AO saw annual revenues of £1.05 billion to March 2020, up 15.9% on a year earlier. AO’s customer base grew last year to nearly 6.5 million customers in the UK. This, along with many other online retailers, must have eaten into John Lewis’ traditional hold on the white goods market.

Waitrose/Ocado Loyalty Battle - September sees Waitrose’ 20 years relationship with online delivery service Ocado come to an end. The tie-up generated 6% of Waitrose’s sales. They are being replaced by Marks & Spencer.

Ocado has already said it has no spare capacity for new customers and it will be interesting how many stay loyal to either brand.

Waitrose has two online distribution centres - Coulsdon and Edmonton in London - to service their online orders and has an opportunity to poach customers from Ocado.

Ocado says it will stock 6,000 M&S products, compared with the 4,000 it sells as part of its supply deal with Waitrose. The alternatives would be the “same price or lower, and of the same quality or better” than the Waitrose ones, Ocado said.

Can Waitrose compete with the robotic efficiency of Ocado? Waitrose had enlisted Today Development Partners, a technology business run by Ocado co-founder Jonathan Faiman, to help grow its online operation without Ocado. However, the deal ended after just four months and it subsequently emerged Faiman, who left the online business in 2009, was being sued by Ocado. 

Online orders are always restricted by the number of vans, drivers and delivery slots. A Waitrose tie-up with Amazon Fresh has been rumoured to help with these online growth ambitions. It is predicted sales online with John Lewis to become a 60 per cent and Waitrose to rise to over 20 per cent.

Waitrose has too many disparate websites selling flowers and gardening products, and should push these all into one site and delivery option. It should also link John Lewis and Waitrose more.

Too Expensive? - Walk into a John Lewis or Waitrose and it feels like everybody shopping there has white hair. While the Boomers are an affluent demographic, the brands are perceived as being too expensive and aren’t engaging with younger or those who are more price conscious. It is particularly noticeable at Christmas with small gifts coming in much more expensive than competitors or what consumers are willing to pay. It needs to broaden its pricing with more prices at the lower end. It also needs to offer more exclusive products and give people a reason to pay more. It needs to think of places like TK Maxx as competitors.

Can Rental Replace Sales? - The company said it was considering creating a way for rental of its products and re-sale of used items. While everybody is going rental crazy, can John Lewis renting white goods and sofas make up sales or will it just cannibalise existing sales and be an expensive distraction?

Announced in August 2020, the items will be rented via a third-party site, Fat Llama, with the service available initially just in London but set to roll out nationally if successful. People can choose between 50 different items from the retailer’s range. Prices start at £17 a month for a desk or chair rented for 12 months, and rise for larger goods on shorter contracts.

John Lewis has said "fair value" would still be central to its ethos but "in a more modernised form” and it hopes to have a new slogan to replace “Never Knowingly Undersold” in place by October.

In January 2020, John Lewis stopped publishing its weekly sales figures, it was seen as a bellwether for the whole retail sector.

Department stores are suffering the most at the moment. Many of these issues were pre-COVID 19, but, like all retailers, it would have speeded up the need for change. John Lewis is a special example of a retailer which, luckily, hasn’t been saddled with a debt mountain. They have the opportunity to be the last national department store standing in the UK and could reap the benefits of high-street competitors disappearing, but that doesn’t change the challenges from online.

It sounds like John Lewis is moving in the right direction and making the right noises, but this cautious retailer needs to make some hard decisions. John Lewis is a retailer people would miss, they need to remind people of that. It just needs focussed adjustment rather than radical amputation.

Wednesday, 05 August 2020 10:45

ChicGeek Comment The Future of FOMO

between jomo and fomo and the new social anxiety the chic geek expert commentHas the fear truly gone when there is nothing to miss out on? The anxiety inducing reason to exist for FOMO, or the fear of missing out, disappeared thanks to COVID 19. Poof! 

In lockdown, nobody was doing anything, going anyway or seeing anything that you need worry yourself about missing out on. What a relief! *exhales* It was a great leveller.

Fashion has been one of the main pushers of FOMO. Hinged on social media, the fulcrum was this idea that everybody was having a better time than you and you needed all this stuff to go with it. The positive side of it suited marketers.

FOMO was the reason you often left the house, the reason you justified needing something that you really didn’t and then pushing the continued momentum on of FOMOing others through your social media channels. LOOK AT ME...

COVID 19 has been one giant reset button, and while people will document their lives, which inevitably will induce some type of FOMO, it won’t have the intensity or the choreography as before. The obsessions with far flung places and life filters was waning anyway. Influencers all looked the same and seemed to do the same things. “I shop therefore I am” became very different when all you were allowed to buy was food and medicine.

I don’t buy into this idea that the world will be radically different. The world is elastic and will spring back into some shape that was recognisable from before. What has changed drastically is the economy. This will be the catalyst. A great recession that will take years to get over and, when out the other side, things will look different. It will be crass to be too show-offish, too material, too extravagant, too pricey - will we see designer logos minimised? - in lean times. It will bookend the 21st century’s teen decade and be a full stop to the look-what-I’ve-got culture which dominated much of the past decade.

It’s the art equivalent of installing escalators into museums and turning them into shopping centres. It was such a visual decade with nothing to be repeated. Disposable. The luxury brands will morph, like they always do, and ones who can repackage this new environment will profit, again, like always. This isn’t wishful thinking, like less pollution and people thinking greener about what they buy, it is a reaction to an action, which, when many people will be unemployed or struggling to make ends meet, FOMO is the last thing they'll need in their lives. This digital window will look dated and tease-like to many. It will be a turnoff.

FOMO is often seen as a fun positive, like seeing what your friends are doing etc., humans are naturally nosy, and used in advertising as a trendy term, but it’s a fine line and this anxiety, "a desire to stay continually connected with what others are doing”, - defined by Wikipedia - can spiral into pressure and a feeling of inadequacy. It was fast and people’s lives have slowed. Money was often the cause of things speeding up. People have appreciated more time and witnessed the little things in nature during these past few months like they’ve never had time to do in recent memory. 

Life was a reason to generate ‘content’ before and this content overload just kept getting more demanding. Images can go back to being memories and records rather than a competitive hustle. We had JOMO, joy of missing out, before, as a reaction to FOMO, but I think we’ll be happy sitting somewhere between the two.

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