Waitrose and John Lewis, owned by the John Lewis Partnership, the UK’s largest employee-owned business, have unveiled new plans to reach more customers, including a £1 billion commitment over five years to accelerate the online business and transform shops. This will make it easier for customers to shop the brands on their websites and apps, and provide more convenient delivery options.
Both brands will also add more local assortments that reflect the diversity of customers depending on where they live. An additional 25 Waitrose shops will join five other stores in the Deliveroo trial, which is attracting new, younger customers.
“Nearly a year on from the initial announcement from the ambitious plan to better unite and simplify the Partnership, John Lewis has laid out its vision in more detail.
There are two standouts from the long list of announcements. Firstly the aim to hit £400m in profits by year five of the plan. The partnership, at a pre-tax level, last hit this number in 2017 (£452m) so it is certainly achievable. However in the period since pre-tax profits have hovered within the £100-£150m mark, highlighting the scale of the challenge, particularly in the current climate.
To do this, John Lewis clearly sees digital as the future of the department store. The heady 60-70% online penetration of sales by 2025 underlines this, but it is more than simply online retailing – it is about digitising services as well, bringing more of the John Lewis service into homes. This will be complemented by more services in-store, and by further investment into its Partners and customer service.
The second major point is the likely demise or evolution of Never Knowingly Undersold, with more details to come in 2021. A significant but necessary step, it is what has defined John Lewis in the past but in its current form has become too restrictive in the current market and in recent years has hurt, not helped, the bottom line. A new value proposition is said to be being looked at – and it is crucial John Lewis does throw out the brand equity that Never Knowingly Undersold gave the business during this evolution.
Whilst these steps are positive they have been heard, or hinted to, before and whilst if successful, along with the announced £300m cost-saving scheme, will stabilise profits – they will not ultimately bridge the gap in profits in the ambitious way John Lewis is targeting.
Therefore the Partnership is expanding its presence in, and into, new non-retail areas alongside a £300m cost-saving scheme. A £400m investment will be placed into expanding its financial service offering, see the business move into housing, horticulture and explore opportunities in rental, resale and recycle. These are all potentially lucrative areas, if the business gets it right, and with a target of non-retail to account for 40% of profits by 2025, it is clear that to bridge the gap in profitability John Lewis has been forced to look outside of retail.”