The John Lewis Partnership (JLP) has long been held up as an example of how business should be done. Back in the early 2010s, David Cameron and Nick Clegg’s coalition government used it as the poster child for “responsible capitalism”. In fact, Clegg, the then deputy prime minister, had a vision for a “John Lewis economy”, as he believed employee ownership was a “hugely underused tool in unlocking growth”.
Fast forward a decade, and John Lewis is looking into diluting its employee-owned structure by selling a stake in order to raise funds to invest in the business. While the need to invest is paramount right now in retail, as businesses look to compete with the technological might of Amazon, tampering with John Lewis’s partnership model would be a huge mistake.
John Spedan Lewis, the son of the department store’s founder, created the partnership model back in 1929 after realising that he, his father and his brother earned £26,000 a year, while the rest of the staff shared £16,000 between them. Not only did he think such inequality was incorrect – “It is all wrong to have millionaires before you have ceased to have slums,” he said – Spedan Lewis believed the lack of morale it created was hindering the business.
The partnership model, whereby the staff all own the business, overcame this. In John Lewis’s case, it ensures staff go that extra mile and make sure the customer gets the best experience, product and value each and every time they visit. It is precisely this model that makes so many of its customers so loyal. John Lewis and Waitrose shoppers could buy cheaper beans, bread or bras elsewhere, but there’s an inherent trust in the retailer that is tied up in its ownership structure.
The fact that the retailer spent millions rebranding John Lewis and Waitrose to add “& Partners” on store fronts, vans and websites just five years ago, shows that it gets this. To dilute this ownership model – even through selling just a minority stake – risks losing what makes JLP special.
This is not the only way that JLP is threatening to squander the unique position it holds with UK consumers. Last year it ditched its “never knowingly undersold” promise, which vowed to refund customers the difference if they found the same item for sale cheaper elsewhere, after almost 100 years.
The retailer had found it difficult to price-match against online competitors so scrapped the pledge and replaced it with “for all life’s moments”, a slogan that could just as easily be applicable to Amazon.
Of course, John Lewis needs to move with the times. With many retailers, particularly department stores, struggling, it needs to adapt. A look at the empty shops on the high street where John Lewis’s rivals Debenhams and BHS used to sit shows the dangers of standing still.
John Lewis itself has been struggling over the past five years, and just last week it reported an eye-watering £234m loss. That has led to some tough decisions and, this week, the retailer was forced to scrap this year’s staff bonus, and hinted that job cuts were on the horizon.
Radical changes may be needed, and indeed some have already been made by the JLP chair Sharon White, who has shut down a third of its stores and branched into housing during her three years in post. In 2021, after trading for almost 60 years, Sheffield’s John Lewis was closed, dealing a devastating blow to the local community. In Birmingham, too, John Lewis closed its doors in 2020 barely five years after opening.
Closures cause a ripple effect. The John Lewis brand has long attracted shoppers to city centres, and the so-called “Waitrose effect” is believed to impact house prices. Not only are such sizeable stores hard to fill, the retailer was also a big reason for shoppers heading into those city centres rather than driving to a retail park or simply shopping online. Without competition from the likes of Debenhams, one questions why John Lewis was unable to sustain these stores.
Changing its ownership structure as a way to shore up profits is a gamble. Despite posting a loss, last week JLP announced a strong balance sheet with £1bn in cash and £1.5bn in liquidity. It also turns over more than £12bn each year, which White is confident will translate into profits of £400m in the next two years. The business should be exploring how it can find the investment needed from its own coffers rather than looking to outside sources.
Times may be tough in retail, but there are reasons to believe this storm will pass. Inflation, which White admitted had hit the business like a hurricane in the past year, and the cost of living squeeze will not last for ever. However, diluting JLP’s ownership structure and ripping the heart out of the business could have more long-lasting effects, hitting its service, customer appeal and, indeed, reason for being.
Spedan Lewis said the partnership’s aim was not to maximise profits but to generate “sufficient” profit for its purpose. It is vital that the business not lose sight of what that purpose is.
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Gemma Goldfingle is the editor of Retail Gazette
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