John Lewis exclusive: ’40 per cent of our profits will come from non-retail by 2030′
High Street giant John Lewis looks back on a difficult year. In March, the 157-year old partnership announced it would not reopen eight stores after lockdown restrictions eased, putting almost 1,500 jobs at risk.
The value of John Lewis stores dropped to almost half the value they were before this year’s and last year’s writedowns, due to the shift to online shopping during the pandemic.
Profit before exceptional items was £131m in March, but the department store chain would have posted a loss if not for the Covid crisis-related support from the government.
Time for City PM to catch up with the longest-serving senior executive at the company, Andrew Murphy, who is executive director of operations for the John Lewis Partnership.
Reporting directly to chair Sharon White, the former Ofcom chief, Murphy joined John Lewis more than 28 years ago in Aberdeen, climbed the partnership’s ladder and joined the executive team in January 2018.
Retail has had an absolute nightmare year, with three strict lockdowns. JL decided to close a range of branches. How can John Lewis and others bounce back?
Although the pandemic was clearly a nightmare for society and on a human level, as a business we’ve come through it in much better shape than we might have feared we would. However, retail was a challenged sector before March 2020 and the events of the last year have heightened that and accelerated some key trends – like the shift to online -so we have to continue to adapt and evolve really quickly and confidently.
Can you give us an example of that.
Yes sure, we have done a lot of work on trends in how customers across the country shop. So, for example, while we’ll have fewer full line department stores, we will invest much more in existing shops to make them really worth visiting and visiting regularly for inspiration and for experiences you just can’t get online. We’ll also introduce local, smaller format shops. These will be supported by the 900+ places which already exist to Click & Collect our products and we will offer more John Lewis products through our Waitrose shops. Service remains our strength and we’ll continue to invest in service and services across home, nursery, and fashion, both in shops and online. Our products aim to inspire and broaden our appeal too, underlined by the recent launch of our ‘ANYDAY’ own-brand .
You are the longest serving member of the Partnership’s Executive Committee. Apart from the pandemic impact, what’s the main change you witnessed in the last six years?
Six years ago we were running John Lewis and Waitrose as two very separate businesses. The executive team at that time operated somewhat like an oversight board with two management boards running business operations. Since early 2020, the exec team has taken more direct control of the running of the business and there are multiple aspects of our two brands which we run as one consolidated activity – for example technology, change delivery, property & supply Chain – the areas I look after – and finance, strategy and our people function too. This combines to make us a faster and ultimately more productive business.
One of the things you are in charge of at John Lewis is technology. How important is tech for JL’s offering, and which tech trends do you watch closely?
Technology now is what real estate was to retailers throughout the 20th Century. You simply can’t run or grow a business at any scale without it. Also, retailers – by definition – have to reflect the society and customers they serve. Technology is therefore definitive of both the JL and Waitrose offerings now and even more so in the future – with around 60 per cent of John Lewis sales made online now and with Waitrose able to fulfil up to 240,000 Waitrose.com orders every week – more than four times the amount at the start of 2020.
Customers want more flexibility and choice in how and when they shop and technology is integral to delivering this.
But what is really important is that we use it in a way that retains the level of service and trust that our relationship with our customers is built upon. This year, for example, we’ll invest £50m in johnlewis.com, improving shopping tools like search and sort, making the shopping journey easier, creating more virtual services and events, we hosted 11,000 virtual events in the past year, and enhancing both the digital and store experience through our app. We’re also working on live chat and bringing richer content into customer journeys based on customer feedback and insight. In terms of trends we’re building our capability in AI & Machine Learning, especially when it comes to automated data analytics and decision making and process automation; two aspects of tech which will have transformed the workplace and businesses by the end of the decade.
Let’s look ahead, life after lockdown, the market post-Covid. What are your thoughts on the recovery process?
The nature of the partnership model allows us to invest with a longer term perspective than a conventional business, even in challenging times and amidst a very uncertain economic outlook. Back in the teeth of the financial crisis in 2007/8 we made bold decisions & investments moving our entire product assortment online, this has a similar feel about it.
The John Lewis Partnership’s ambition is that 40 per cent of profits will come from new, so non-retail, lines of business by 2030.
For that to be true we have to continue to evolve, be bold and explore new ways to deliver for customers. Our customers want John Lewis and Waitrose to play a bigger part in their lives; particularly in areas where trust really matters and where existing providers don’t measure up to our customers expectations. So we’ll be expanding the scope of our financial services, we’ve already relaunched our Home Insurance offer and rolled out interest-free credit across all of our channels, and we’ve set aside significant funds for innovation and partnerships. We really think there’s a significant sweet spot here for a brand with the customer loyalty and trust that we generate and as a business which isn’t motivated solely by profit.
And that includes a move into housing?
Yes, we’re laying the foundations, literally as well as figuratively, to move into private rental housing which is another market in which we’re getting huge pull from customers. Meanwhile, there are lots of opportunities we’re pursuing closer to our retail heart – particularly in rental, resale and recycling – we expect to be a big player in the circular economy.