Bryan Roberts; Retail Insights Director, tcc global
The future is not looking golden for the UK’s Never Knowingly Undersold high street stalwart, John Lewis. The beginning of this year saw the retailer slash staff bonuses by 40 per cent, close its distribution site in Edinburgh, and axe nearly 800 jobs in restaurants and store administration in its biggest ever round of redundancies.
As its results roll in this week, the competitive landscape continues to look challenging, particularly as Jeff Bezos continues to encroach on its not-so-evergreen turf. In contrast to John Lewis, Amazon, which has a wholly different set of KPIs and financial parameters to govern its performance, announced earlier this year that it will open four new fulfilment centres that will create 1,200 jobs in the UK. Rumoured to be developing own-brand food products, to sit alongside its current Whole Foods and branded offering – as well as launching its new own-brand clothing line FIND – Amazon has the potential to rock the John Lewis/Waitrose boat further.
Amazon’s FIND collection isn’t a bargain-basement attempt to undercut rivals on the price of basic T-shirts. Instead it focuses on fashion-forward items: women’s patent boots cost £56, high-waisted jeans are priced at £34, while men’s skinny fit suit jackets are £54. Awesome prices, even if some of the designs might puzzle the most earnest hipster.
In the US, where Amazon’s clothing offering has seen stronger investment – including Prime Wardrobe, its own athleisure brand and an assistant called Echo Look – it is expected to surpass Macy’s to become the biggest apparel seller in 2017.
John Lewis, arguably one of our country’s finest retailers, is not sitting idle while the tanks line up on its lawn. Taking things into its own hands, the retailer has ramped up its focus on private-label. It launched a new own-brand denim collection in March, And/Or. Luxury womenswear label, modern rarity, and the contemporary furniture collection, Design Project have also been developed over the past few years. New MD Paula Nickolds has also expressed an ambition to grow the number of exclusive products on offer. She hopes that by 2020 half of the department store’s range will be exclusive own brand products.
Ex John Lewis MD Andy Street has called Amazon out directly in the past, complaining that as a multinational, it has an ‘unfair advantage’ because it benefits from being domiciled elsewhere, while plenty of other commentators have pointed to the business rates anomaly between bricks and clicks. And indeed, John Lewis names Amazon as one of the ‘online-only or mail order businesses’ that it doesn’t price match under its Never Knowingly Undersold mantra.
John Lewis’ unique own-brand assortments won’t be found — or sold for less — anywhere else. As with Amazon’s new fashion range, the higher margins associated with private label are as important as the benefits that they create in terms of exclusivity and ‘reasons to visit’. Asda is a great example of the advantages of creating a compelling in-house fashion range: a real differentiator and driver of reasons to visit: both stores and online. There is a demonstrable link between exclusive product and loyalty.
At fellow department store Debenhams, £1 in every £5 is spent on a Designers at Debenhams product. According to its marketing director, nearly half of its business is own brand. However, with ten stores at risk of closure and plans to shut 11 warehouses, it is proof that own-label isn’t the elixir vitae. Freshness, stylishness and value are also required.
John Lewis will need to keep fighting hard to defend market share as Amazon’s offer grows in sophistication beyond the functionality of eBooks and bin liners. A focus on in-store experience has worked very well for Waitrose, where sushi bars, free coffee, and some new stores and remodels have enabled it to defend its turf pretty well against the discounters Aldi and Lidl.
On the high street, John Lewis will roll-out experience-focused stores, with an evolved foodservice proposition, enhanced retail theatre and the ability to book services – like plumbing – with trusted partners to drive a steady footfall, alongside developing its own brand products.
John Lewis is making the right changes, but will it be enough to compete with Silicon Valley? My sense would be that the excellent human beings present in these great stores will be more than a match for the robots from elsewhere.
Originally published in Retail Week on 18.09.17