John Lewis commits to spending £1bn in digital transformation drive

The John Lewis Partnership has today announced a commitment to spend £1bn over the next five years in order to pivot to digital and transform its current shops to adapt to the changing food retail sector in the UK.

As part of today’s plans John Lewis intends to ramp up its click and collect to more than 1,000 locations and increase Waitrose deliveries to more than delivery slots 250,000 a week.

2020 has been a difficult year for the company and its compeititors, as they look to adapt to the COVID-19 pandemic. Today’s plans are part of a series of cost-saving measures, that will look to save up to £300m a year from 2022.

The company also stated that it will be look to  develop rental options on products for customers – a growing trend within the industry.

Sharon White, Chairman of the John Lewis Partnership, said: “We’ve seen five years of change in the past five months and Waitrose and John Lewis have responded with great agility. Our plan means the John Lewis Partnership will thrive for the next century, as it has the last.

“We’re adapting successfully to how customers want to shop today, while showing the Partnership is improving lives and building a more sustainable future. We’ll share our success with our customers, Partners – who own the business – and our communities.”

Nina Bhatia, Executive Director of Strategy & Commercial Development at the John Lewis Partnership, said: “This is a bold plan to grow our business and get us much closer to our customers. Waitrose and John Lewis are two of the country’s most trusted brands and we’ll offer the best products and customer service on the high street and online.”

“We’re creating new inspirational services for customers where strong ethical values and peace of mind matter, like reusing and recycling products, personal savings and rented housing. Our plans will firmly establish Waitrose and John Lewis as the go-to brands for customers that care about quality, value, and sustainability.”

Industry reaction

Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown

The pandemic has brought about a revolutionary shift in shopping habits as consumers switch to online stores and opt for click and collect services from the high street.  For retail giants like John Lewis, who have dominated the sector with mega footprints across shopping centres and retail parks, pivoting quickly to keep up has been a huge challenge.

Chairman, Dame Sharon White, is leading the charge of change at John Lewis and she’s committing £1 billion over five years to accelerate the move to digital and transform shops. This will include ramping up its click and collect service to 1,000 locations – both in store and at other collection points.

John Lewis has already been on a cost cutting drive, with plans to close eight stores John Lewis stores and four Waitrose supermarkets. But extra savings of £300 million a year will need to be made right across the partnership’s operations. So far, there is scant detail about just how costs will be trimmed but jobs at head office will be in the firing line in this drive for efficiency and it’s inevitable that the store footprint will be reduced further.

Waitrose, fresh from its divorce from Ocado, is not looking back, and has plans to vastly increase delivery capacity to 250,000 slots a week, from its pre-pandemic level of 55,000. As customers tighten their belts, the essential range at Waitrose saw a 10% uplift in sales over the past six months and the group says that focus on offering value lines will continue.

Winning over the ethical customer is also being seen as a priority and John Lewis is promising to give a new lease of life to its used goods. It’ll offer a buy back or take back option on all its products by 2025 and by then key raw materials in all its own brand goods will be from recycled or sustainable products. It’s also tapping into ‘the pay as you go’ trend by developing rental options for customers.

By making these changes the John Lewis Partnership aims to reach £400 million in profit by year 5 of the transformation plan. These are all lofty ambitions for John Lewis given they require huge investment in a time of huge economic uncertainty. This year was the first time since 1953 that the company didn’t pay a bonus – highlighting the once in a generation challenge the partnership is facing. Management will be counting on the enthusiasm of staff and their desire to share once again in profits, to help turn the big ship around.