Never Knowingly Undersold

01STOrai profiles the people management practices of JOHN LEWIS – one of the largest high street retailers from the UK.

The John Lewis story is characterized by success on three fronts – sales, online and people.

They have ridden out the recession in the UK and have used their online channel to script a successful, “Brick and Click” strategy. Sales as of December 2013 were £ 11 bn, with the online channel contributing £1 bn.

The company is entirely owned by the employees. There are no external shareholders.

Laura Whyte, Personnel Director, John Lewis delivered the Key Note speech at the session on “Emerging People Management practices” at RAI’s Retail Leadership Summit in February 2014. STOrai presents some insights from that speech.

Employees are partners: John Lewis is entirely employee owned, and is one of the largest retailers in the UK – sales of £11 bn. The People management Model is based on the principle that “A happy, engaged workforce and a long term focus delivers shareholder value”.

02The proposition to employees is about outstanding leadership and training. John Lewis believes that employees, will then deliver a customer satisfaction proposition, sufficiently differentiated as to create value.

Profits are either ploughed back into the business, or redistributed back to the employees. Everybody gets the same percentage of profits irrespective of grade / level.

The nomenclature used to refer to employees is different. They are consistently called “Partners”.  The Partnership model has three key principles:

  • Purpose: Empower Partners with 03the knowledge and desire to provide outstanding service
  • Power: Generate incremental sales through customer loyalty
  • Profit: Enable the development of deeper customer relationships

Leadership Compass: John Lewis has internally developed and articulated a “Leadership Compass” (see image). The compass measures the balance between Strategy vs. Execution on its vertical axis, and the ability to keep the balance between “Legacy v/s Change” on the horizontal axis.

04The Leadership Compass recognises the contradictory pressures that Partners are expected to manage. By measuring both sides of a skill set (i.e. strategy AND execution / Legacy AND change) – it acknowledges the fact that these will not always be in perfect balance. Partners are expected to use the compass to maintain a ‘creative’ tension, while driving business towards a goal.

Partners concerns can range from advertising to the environment

The John Lewis Own Brand swimsuit campaign:
Please could you confirm the stance the Partnership takes on using models smaller than UK dress size 10, and whether these models used fit the Partnership’s criteria?

Business expenses:
We have recently seen a lot in the media about the abuse of financial allowances and MP’s expenses. Can Partners be reassured that controls are in place to ensure no abuse takes place in the Partnership at any level?

Plastic bags:
As a responsible retailer, why are we not leading the field
All concerns are carefully debated, considered and voted upon.

Implementation: Partnership principles are implemented through the following:

  • Each week – two magazines are published in-house – a local, store specific edition and a national magazine.  Any Partner can write in anonymously to these magazines and their manager must respond. No editing of the letters is permitted – unless the Chairman approves. Partners concerns can range from advertising to the environment – and all concerns are debated carefully and publicly and then voted upon.
  • Employee attitude surveys are used to gauge feedback. Feedback must be implemented, if this is the opinion of the majority of Partners.  Response rates to these surveys are 88%.
  • Partners decide the final % of profits to be redistributed.

Does it work? If the ‘proof of the pudding is in the eating, then the John Lewis model does work’.

“Most UK retailers reacted to the 2009 recession classically – they cut inventory and head count. John Lewis decided to continue its approach of focussing on the long term. “Let the profit takes its course” was the majority view of the Partners” says Laura.

05In 2009, the company did not make money for 5 months – but the Governing Council decided to continue with the strategy of using online as a low cost channel for growth. They saw the online channel as an opportunity, and in 2010, increased SKU’s from 45,000 to 200,000.

Over the next four years, the channel became a growth engine – 2013 online sales crossed £1 bn.

What next: The Company’s focus now is to consolidate and expand its online success.  “We expect that by 2020 – Bricks and Clicks will be equal contributors to sales” says Laura. The next part of the story is to go mobile – in 2013; the company spent £40 million on its website and mobile offerings.

Online success is about controlling the supply chain on an ‘end to end’ basis – John Lewis is building the second fully automated distribution center @ 750,000 sq. feet to match its twin.

A large segment of the online customer is young – 39% are less than 35 yrs. old. This is good news for a brand that has often been considered, “solid, stable, middle class” in the UK market. To cater to this demographic, the company has created designer collaborations – and developed a master brand in Fashion & Home.

  • Over 2,000 Partners registered for an external qualification in 2013
  • Address concerns that retail is not a “proper job”.
  • 335 Partners achieved a qualification in Distribution
  • 215 Partners achieved a Contact Handling qualification
  • New JL apprenticeship programme

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Retailers Association of India (RAI) is the unified voice of Indian retailers. RAI is a not for profit organization (registered under section 25 of Companies Act, 1956), works with all the stakeholders for creating the right environment for the growth of the modern retail industry in India. RAI is the body that encourages, develops, facilitates and supports retailers to become modern and adopt best practices that will delight customers. RAI has a three charter aim of Retail Development, Facilitation and Propagation.