John Lewis's new strategy goes beyond retail, is even more digital
John Lewis Partnership has unveiled a “bold” new strategy to help its John Lewis department stores and Waitrose supermarkets reach more customers.
The new five-year Partnership Plan developed under its Chair Sharon White aims to see the group reach £400 million profit by its final year and comes with an expansion of digital, virtual and delivery services "to get closer to customers”.
It also means “inspirational new services and partnerships to rebalance business beyond retail”. And it includes a commitment to doing good with the company saying it's pledged to recruit young people coming out of the care system while also making “major commitments on cutting waste and net zero carbon”.
It’s committing £1 billion over five years to accelerate its online business and transform its stores, the latter being modernised “so we have the right space in the right place”.
But this is about more than just shops. After the first phase of improving customer service in its core retail business, it’s committing a total of £400 million “to grow in new areas where we are trusted and which fulfil customers’ needs”. The reason for this is that “tightening retail margins in the long term won’t allow us to pay the wages we would like, or invest in our customers and communities. We're targeting 40% of our profits from new areas by 2030”.
Part of the funding will come from cost savings of £300 million a year by 2022, that will see it making its operations and head offices simpler and more efficient.
The strategy change comes after the company, which not so many years ago was one of the most successful in the UK, has seen profits ebbing away and sales dropping in a UK retail environment that’s going through unprecedented change.
The new strategy aims to make the firm’s two chains (and webstores) “the go-to brands for customers who want quality, value and sustainability”.
The UK’s largest employee-owned business said that it's a long-term plan and the unusual nature of its ownership allows it to take a long view of the changing world of retail that might not be possible for a listed company, or one that was in private hands.
It also said the five-year plan is self-funding “and takes into account uncertain trading”.
The company recognises that consumers view shopping differently these days and this means it moving further beyond shopping than it has ever done. It said of this: “We’re a Partnership for positive change, improving lives and building a more sustainable future. We’ll grow in areas where these are important to our customers, like rental, recycling, savings, insurance and private rented and social housing.”
But retail remains key and the firm will ensure its John Lewis and Waitrose operations work more closely together, which means some products from each available in the other’s stores and online.
In its stores, it’s focusing much more on affordability. That comes after its Waitrose Essentials range has seen sales rising almost 10% in the past six months. The relaunch of the under-performing John Lewis Home range in the spring will also introduce more affordable price points. “This will reinforce fair value to broaden our appeal to more customers, recognising shoppers are especially cost-conscious at the moment,” it said.
The John Lewis chain’s focus will now be on “meeting the needs of families with a variety of products, services and celebrations all under one roof and online”. And online is key as John Lewis should be a “60-70% online retailer by 2025”.
Also deepening its digital offer, it’s “bringing expert Partners and products into customers’ homes through a tap on an app”. This means investing in more virtual services like personal styling, home design and the John Lewis Virtual Christmas Shop.
To support this, it’s expanding Click & Collect and will soon have 1,000 locations to buy or pick up its products to “reflect changes in how people are shopping with us”.
The company is bringing forward its ambition to be net zero carbon by 15 years to 2035 and said John Lewis will be “leading the ‘made to last’ movement". It will do more to ensure its products “can be loved for longer”. All product categories will have a ‘buy back’ or ‘take back’ solution by 2025; all key raw materials in own-brand products will be from sustainable or recycled sources by 2025; and it will develop sustainable rental and resale options for customers. It has more than 20 initiatives running across its different product ranges or being developed to test with customers already.
And when it expects to reach over £200 million in profit, it will pay Partners the voluntary Real Living Wage. Profits should be at this level in the next two years.
The profits growth should also be helped by its move into housing. It has identified 20 sites it owns “that could be used to benefit local communities by providing quality and sustainable housing, while providing a stable income for the Partnership”. It will make planning applications for two of these in the New Year in Greater London.
But with boosting its retail ops always key, it added that entering the build-to-rent market “also allows us to furnish properties using John Lewis Home products and deliver Waitrose food. We’re a landlord already at three of our properties so this is an obvious extension for us. And we’re now talking to developers and investors who can help us achieve our ambitions”.
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