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As John Lewis’ managing director leaves the business, what does that mean for experience-led retail strategies?

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The John Lewis Partnership today announced the departure of John Lewis managing director Paula Nickolds as it reported falling sales at the department store over Christmas.

 

Nickolds, who was to have taken the role of executive director, brand, when the Waitrose and John Lewis businesses start to be managed as one business, will instead leave when that future partnership model comes into place in February.

 

Her departure comes after a Christmas in which both John Lewis Partnership businesses, Waitrose and John Lewis, reported a decline in total sales. But while Waitrose reported like-for-like and online growth, John Lewis’ usually buoyant online sales grew only weakly. Overall, gross sales at the partnership came in at £2.2bn in the seven weeks to January 4.

 

John Lewis sales of £1.1bn over that period were down by a total of 2.3% compared to last year, and by 2% on a like-for-like basis, which strips out the effect of store openings and closures. Online sales grew by 1.4%.

 

Waitrose, meanwhile, reported sales of £1bn over the same period. That’s down by 1.3% in total, but up by 0.4% LFL. Online sales were up by 16.7% - and in the week to Christmas, online grocery orders were 23.4% ahead.

 

Sir Charlie Mayfield, chairman of the John Lewis Partnership, who is set to retire this year, said both brands had performed strongly at an operational level. But while Waitrose had seen “encouraging progress against our milestones,” John Lewis had seen falling sales in home and electricals and over peak trading. Black Friday sales – a period in which John Lewis discounted for longer than usual – were up by 10% on the same time last year, but demand fell in subsequent weeks.

 

Profits at Waitrose, he said, were likely to be broadly in line with the previous year, but while John Lewis’ first-half losses would be reversed in the second half, full-year profits would be “substantially down on last year”.

 

Today Mayfield said: “Paula has been with the Partnership for 25 years and has been an outstanding Partner and leader throughout her time. She has played a central role in the development of John Lewis & Partners over the last 10 years in a variety of senior positions. After some reflection on the responsibilities of her proposed new role, we have decided together that the implementation of the Future Partnership structure in February is the right time for her to move on and she will leave the Partnership with our gratitude and best wishes for the future.”

 

The implications for experience-led retail

Paula Nickolds has led John Lewis’ strategy of focusing on experiences within retail since she took on the role of managing director in 2016. Under her leadership, the retailer’s new store openings, most notably in Oxford and Westfield London, featured concierge desks to help customers get the most out of a visit to the store and brought in experts from style and fashion colleges and theatres to train staff in experience-led selling, from personal stylists to workshops on home technology and lighting rooms. Technology from augmented reality – to show how lipsticks look on – to virtual reality – so customers can see how sofas might appear in their living rooms – have been employed to improve the customer experience. The retailer also invested in services, buying home improvement services business Opun, and has been repeatedly named an Elite retailer in IRUK Top500 research for the strength of its multichannel performance.

 

But while beauty sales were up by 4.7% over Christmas, fashion was only 0.1% ahead and home (-3.4%) and electricals and home technology (-4%) sales were both down. It will be interesting to see the details in the partnership’s full-year results of just what has worked and what hasn’t.

 

Experiences have been at the heart of John Lewis’ quest to find a new role for department stores at a time when sales in the sector are moving online fast. It is also a direction taken by fellow-department store retailers, also suffering from the move to buy online, from Debenhams – which has built its strategy on mobile and social shopping – to House of Fraser – which has opened a cinema in its Oxford Street store. But will John Lewis now change its direction as well as its managing director?

 

And for department stores

When John Lewis went through a major strategy reset in 2018, it suggested it was willing to sacrifice profits in the short-term in order to invest in selling across sales channels to give customers the experience they want in the long-term. It aimed to be different from its competitors, and to innovate in order to respond to what it termed “a period of generational change”.

 

In doing so it was developing a tradition of investment in multichannel that has helped to make John Lewis a leading retailer and to buck the woes felt by some other department store chains, most notably Debenhams and House of Fraser, both of which have gone in and out of administration in the last two years at a time when department store and fashion sales have moved online faster than other sectors. Up to now the John Lewis strategy has worked, and sales and profits have generally improved – until 2019, a year marked by widespread economic and political uncertainty. John Lewis reported a first half loss in September 2019 but nonetheless said it would continue to speed up its transformation. That could be set to change now, as falling Christmas sales continue that decline.

 

But this is a problem that goes well beyond John Lewis – and beyond department stores. BRC figures also out today suggest that while online sales have grown, the last year has more generally been the toughest for retail on record, while the Centre for Retail Research says retail is going through a crisis. Despite this, some retailers have fared better than others. Mountain Warehouse, earlier this week, said its strong results meant showed how wrong the doom-mongers who predicted the death of the high street were wrong, while discounter Aldi saw its sales rise strongly. Perhaps we can draw some early lessons by saying that those that have done well seem to have either invested in giving customers the products they really want to buy, delivered with good service across channels, at a low cost relative to others.

 

But ultimately, it may be that shoppers are buying less than they did because they still aren’t confident they have the money to spend in an economy where Brexit uncertainty is currently on course to persist until the end of this year. Perhaps, too, they are buying online because they don’t have the time or inclination to venture into department stores, no matter how good the experience. Perhaps, too, they are buying less for environmental reasons. Minimalism is gaining traction, while green campaigners are urging shoppers to think before they buy. The scenario that retailers may need to respond to could well be evolving into one in which shoppers spend less but buy the best quality they can when they do so.

 

Image courtesy of John Lewis

 

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