Restructuring for online growth: What retailers need to know

Why are we talking about this now?

John Lewis has revealed it is to axe 325 jobs in stores to cut costs and rebalance the business to support its rapid online growth.

The cuts, which are being made as the bulk of growth comes from online, will be made at 28 of its 40 stores and will result in its 10 department managers replaced by one or two more senior managers.

John Lewis said: “What we are doing is anticipating how the retail market is changing and ensuring our shop model is competitive for the long term. Otherwise, we will end up in a position that some of our competitors are reflecting.”

Who else is doing it?

A number of retailers have fundamentally restructured their businesses to reflect online growth. Debenhams is among those to have reformulated their models in recent years.

B&Q last year cut 15% of its head office staff as it restructured to create a more “customer focused, agile, omnichannel retailer” and Waitrose is restructuring its retail services division, where 200 positions are under review.

Dixons and Argos are also remodelling and examining their store estates to understand how many stores and staff they need.

Is it the right approach?

Retailers quick to make tough decisions to embrace online - including Tesco and John Lewis - appear to be reaping the benefit through strong sales growth.

Conlumino managing director Neil Saunders believes that stores need fewer members of staff. “If you look at John Lewis, fewer, more senior managers will control each department and communication from central buying directors can come down quickly. In the past, stock availability, purchasing and delisting needed close attention,” he says.

Are others likely to follow?

“It is inevitable retailers will be making personnel changes to the number of people they need. If the bulk of sales growth is online then cost bases need to be tightened,” Saunders says.

Retailers in categories competing strongly with pure-play etailers, such as electricals groups, which have their full ranges available online will question how closely store staff need to look at range and stock buying.

Saunders argues in sectors such as food this will be less important, because shelf stackers and checkout operators will remain key to running a shop.