Opinion: John Lewis results show stores urgently need new purpose

The partnership reported a “one-off reduction” of £123m in the value of John Lewis department stores “principally reflecting a reassessment of the role that shops play in driving online purchases”.

The statement that shops – some at least – have become less important in powering ecommerce sales potentially undermines what has been a comforting mantra for bricks-and-mortar retailers: that stores, through their importance to services such as click and collect, are an advantage in building online appeal.

Not quite. Or at least, let’s hope not.

“The more new ideas that are tried out by retailers, the better”

Shops still account for the lion’s share of retail sales, but John Lewis’ impairment charge shows that all these years into the multichannel era, making the economics work can be as challenging as it’s ever been. The purpose of the store must be clearer than ever and, while department stores have come under particular pressure, the issue is only likely to become more pressing for other types of retailer.

John Lewis has been asking itself the question for some time, leading to an increased focus on service, services and experiential appeal ranging from roof terrace cafes to technology classes and concierge-style customer care. But the latest results show that, despite its efforts, it is under pressure. Profits were eroded.

As part of a strategic review initiated by White, the partnership “will look at right-sizing our store estate across both brands, through a combination of new formats and new locations; repurposing and space reductions of existing stores; and closures, where necessary”.

That makes sense from a cost perspective when space is surplus to requirements but, more importantly, also in a quest for store models that appeal to contemporary consumers.

Reasons to go shopping

As Primark boss Paul Marchant once told Retail Week, retailers are in competition not just with each other but, for some time and increasingly, new types of competition for spending and share of attention. He said: “When it’s raining on a Saturday morning and it’s cold, give me a reason to jump out of bed and go shopping because it’s easy to stay home, watch Netflix and stay cosy.”

John Lewis may not yet have found the right answer to that challenge, but that’s why it is right to try out new ideas, so long as it can learn fast and change tack when necessary. The more new ideas that are tried out by retailers, the better.

“Stores need to work harder than ever to earn their keep, despite accounting for such a high proportion of retail sales”

When the world is changing so rapidly, so must bricks-and-mortar retail. White envisages that the transformation she is leading at John Lewis “could take three to five years to show results”. While that may be a fairly standard timeframe in comparison to previous turnarounds you wonder whether these days, if and when a retailer gets to the end of one transformation, it will already be time to start another.

As retail property giant Intu’s travails show, life comes at you fast. Intu has suffered a fall in rental income and the value of its shopping centres has crashed as old bricks-and-mortar retail models are questioned.

These days stores need to work harder than ever to earn their keep, despite accounting for such a high proportion of retail sales. The CVAs of recent years show that while retailers bore unfair cost burdens such as business rates, their stores and business models didn’t keep up with the times. Permanent evolution is needed – and urgently.