John Lewis preps loyalty overhaul as it claims turnaround ‘on track’

The John Lewis Partnership successfully cut its pre-tax losses from £517m to £26m over 2021, the first year of its five-year business turnaround strategy.

The company cut costs by £170m over the year, reducing its management staff numbers in stores and its central teams, as well as closing eight John Lewis stores and a delivery hub. On launching its turnaround plan, the business promised to reach £300m of savings by the end of 2022.

The John Lewis Partnership also reported profit before exceptional items of £181m, up 38% on its previous financial year. This marks the best profit before exceptionals posted by the company in four years, £50m better than last year and an £11m improvement on 2019.

However, the business faced exceptional costs of £161m – mostly related to restructuring, property lease exit costs and a small write down of John Lewis stores – as well as delivering a 3% bonus to staff, totalling £46m.

We’ve got much better visibility on the data of our customers, how they shop and what inspires them.

Pippa Wicks, John Lewis Partnership

The John Lewis brand alone achieved its highest ever sales at £4.93bn, up 8% on a like-for-like basis since 2020, and up 10% on 2019.

Meanwhile, sister brand Waitrose hit sales of £7.54bn, up 1% like-for-like on the previous year and up 11% on two years ago.

“We have made a good start to our Partnership Plan, but are only one year through our five year transformation,” said CEO Sharon White.

With the transformation “on track”, the business will “invest heavily” as it enters the second year of its plan, as it doubles down on being the “go-to brand for service, quality, sustainability and, increasingly, value”, she added.

Digital investment

Next year the business will invest £119m in John Lewis’s shops, digital services and distribution capabilities, alongside a £72m investment in Waitrose’s digital services and distribution.

Online makes up roughly 60-65% of John Lewis’s sales on an ongoing basis, the brand’s executive director Pippa Wicks said on a call with press today (10 March).

The newly relaunched John Lewis app now accounts for 23% of online sales, up 40% on 2020.

“People are using [the app] more and more, and we’re able to get our customers really engaged with us to inspire them and share with them all sorts of products and content that makes their lives easier and better,” Wicks said.

John Lewis will also be overhauling its ‘My John Lewis’ rewards scheme later this year. Wicks told Marketing Week that enhancements to the programme will mainly revolve around increased personalisation.

“We’ve got much better visibility on the data of our customers, how they shop and what inspires them,” she said, pointing to the launch of new online features such as ‘Fit Finder’, which helps customers get the right sizing, and live shopping.

“We’re just using our information to be able to serve to customers based on their shopping habits, [and work out] what works for them in a more personalised way.”

Last month Waitrose relaunched its MyWaitrose loyalty scheme to increase personalisation, while scrapping its free newspaper and coffee offer.

The new scheme will see the supermarket double its investment in offers and discounts, with members to receive offers on a weekly and monthly basis. Customer savings are to increase by 112%, Waitrose claimed.

It’s not about competing on value, it’s about having more accessibility to a wider range of price positionings.

Pippa Wicks, John Lewis Partnership

Last week, however, the supermarket had to backtrack somewhat on the changes and reintroduce a printed vouchers system, as customers, particularly of older generations, reportedly complained the scheme was “discriminating” against those without access to the smartphone app.

Meanwhile, Waitrose will also be investing in ways to bring its brand and products to customers through alternative channels, the supermarket’s executive director James Bailey said.

The grocer will continue to grow its partnership with Deliveroo, and is in the early stages of a partnership with meal delivery brand Mindful Chef. “I’m pretty confident we’ll go a lot further with that, and that takes us into the home delivered meals kit business,” Bailey said.

However, both John Lewis and Waitrose will also be investing in attracting customers to their bricks-and-mortars stores. An investment of £55m will be made to complete a further 23 major refurbishments of Waitrose stores.

Some 40 Waitrose branches now have John Lewis inserts and the full range of John Lewis products, which will more than double by the end of the year as part of the ‘Better Together’ programme to bring the two brands closer together.

Customer response to the programme remains “really positive”, Bailey said, with one third of customers saying they will shop more as a result.

John Lewis is to refresh a further 15 of its stores this year, after investing £25m in its optimisation programme last year and refreshing six stores.

On the John Lewis stores, Wicks explained: “It encompasses re-laying the store so it’s better for the customer journey, new ranges and new furniture layouts, and really dialling up our visual merchandising to inspire our customers.”

John Lewis has also introduced a seasonal showcase in all stores, which changes roughly every six to eight weeks to bring new products to customers’ attention.

“We’re giving people reasons to visit more frequently,” Wicks said.

Value despite inflation

Both John Lewis and Waitrose have promised to maintain their value and minimise price increases this year despite inflationary pressures, as value becomes an increasingly integral part of the two brands’ offerings.

The launch of John Lewis’s budget-friendly range Anyday has been the retailer’s most successful own-brand launch ever, with 120 million sales in the first nine months. Some 93% of customers who shop the range also shop other John Lewis own-brand ranges, while 25% of its buyers are new or reactivated customers.

“It’s been a really successful launch for us. It combines our lovely quality with terrific value for money,” Wicks said.

Last week John Lewis committed an investment of £500m this year to provide its customers with “everyday quality and value”, after dropping its ‘Never Knowingly Undersold’ tagline. Part of this investment will go into the new loyalty scheme.

However, Wicks told Marketing Week the retailer is “not competing on value”.

“We’re offering products at all price ranges so that our customers can shop where it works for them,” she said. “It’s not about competing on value, it’s about having more accessibility to a wider range of price positionings.”

She added: “Our roots in service and quality are really fundamental and you’ll see us taking more strides in both those areas over the next few years.”

Meanwhile, while Bailey said there is “no way” inflation doesn’t find its way through to Waitrose customers this year, but is working with suppliers to keep prices as low as possible.

“We’re being very careful about how we pass [costs] on while maintaining our competitive position in the market,” he said.

‘Inflation will separate the strong marketing companies from the weak’

Diversification

Elsewhere, the Partnership plans to continue to invest in the diversification of its revenue streams, as it aspires to have 40% of profits come from outside retail by 2030.

The company will continue to develop its property rental proposition, while accelerating growth in John Lewis Financial Services with a £53m investment.

The business said it is “thrilled” with the evolution of the financial services business so far. It introduced point of sale credit this time last year, and already has £100m worth of sales through the scheme.

CEO White confirmed the business’s diversification plans remain “on track”.

Source Article