Retail restraint: John Lewis and Primark decline government help to play the long game
For retail, the story of Covid-19 has been one of survival.
Inevitably, the sector has looked to the government for assistance. Even the most hardened devotee of the free market has seen the Treasury’s coffers as a life belt to help companies get through the worst of the pandemic. Change and adaptation can come later.
This was true for the initial furlough scheme, and remains the case as Rishi Sunak switches to offering a £1,000 per employee bonus to companies who retain furloughed workers.
Two major players, however, have bucked the trend. Discount fashion retailer Primark has announced that it “shouldn’t be necessary” to take advantage of the government’s job retention bonus, passing on a potential £30m in assistance. John Lewis has said similarly that it does not expect to get any money from Whitehall, even while announcing job cuts and store closures.
What on earth is going on?
The stated rationale is perfectly sound. Primark argues that it already took back its furloughed staff when it reopened stores in mid-June, while John Lewis is going through its own restructuring and rationalisation which will see the closure of some major sites like Birmingham and Watford. They do not, therefore, “need” or “deserve” the financial contribution from taxpayers. They have done it all on their own.
I have doubts about this sudden outbreak of uncontrollable honesty. Rather, I suspect that Primark and John Lewis have shrewdly perceived that reputation has become an absolutely critical brand attribute during the coronavirus crisis.
Some retailers grasped this truth very early on. Waitrose, the John Lewis-owned supermarket chain, set aside certain opening hours for elderly and vulnerable shoppers as early as March, while Tesco introduced dedicated time slots for NHS workers. Other brands, however, have been slower on the uptake.
When the effects of Covid-19 shake out, as surely they will, there will be intense scrutiny on all businesses, and a calculation of who had “a good war”. Tim Martin, the mercurial boss of JD Wetherspoon, hit exactly the wrong note in the early days by saying he would not support workers not required at his pubs, and suggested that they could go and work for Tesco. The result was a Twitter hashtag #neverspoons and the release of an app by the same name allowing thirsty pub-goers to find alternatives in their area.
Primark and John Lewis obviously want to avoid a similar fare and be in a position to sell a good story to customers and maintain their image as socially responsible companies.
There may be something else at work here too. The government is thinking hard about the future of retail. Last month, the Prime Minister set out sweeping plans to revitalise the high street, including the relaxation of planning laws, £96m for the “Towns Fund” to help 101 selected towns spend on improvements, and nearly £1bn for “shovel-ready” local growth projects. Last year the government commissioned a High Street Task Force, chaired by Ellandi founder Mark Robinson, to examine plans for breathing new life into the critical retail sector.
With an open-handed and open-minded culture abroad in Whitehall, John Lewis and Primark may have calculated that it could pay in the long run to be on good terms with the government.
The retail sector will be transformed wholesale over the coming years — that was already clear long before anyone had heard of “Covid-19”. The question is how. But it is interesting that major players have identified potential direction of travel.
Social responsibility and close cooperation with an interventionist-minded central government are key themes, and Primark and John Lewis have cleverly spotted them.
Main image credit: Getty