Giving back | IR News | Inside Retail

Giving back

Posted Date: 21/11/2012

By Carla Bridge

In this day and age, the phrase “successful department store” is quite the oxymoron.

Although there’s quite a few struggling right now, there’s also a couple of strong examples of department stores around the world getting it right, and one of those is Britain’s John Lewis.

The business is a testament to the belief that bigger isn’t always better, and that giving back to staff and fostering the passions and principles of those at the top, right down to those on the shopfloor, makes every bit of difference.

In the last financial year, John Lewis department stores turned over £3 billion. An even mightier feat when you consider it made this amount from just 35 stores, six of which are small format stores under trial.

Noel Saunders, MD of John Lewis’ Stratford store and former MD of its Oxford St London flagship, said he is often asked why John Lewis doesn’t have a larger portfolio of stores.

“In fact our ambition is, by the year 2020, to have no more than 50 shops in the portfolio. And that is relatively modest growth,” Saunders explained to the Westfield World Retail Study Tour.

“Debenhams for example, would have in excess of 100 shops in their portfolio, and it would be my guess that their turnover last year would be about £2 billion from over 120 shops,” he said.

“Bigger isn't better, it’s just about getting the right mix of assortments and optimising the size of the physical estate of our shops.”

But while it’s one thing to be performing in the traditional bricks and mortar environment, it’s quite another to have success online. And here, John Lewis also puts its competition to shame.

Online transactions comprise a whopping 23 per cent of the brand’s annual sales.

“The online customer and physical customer are both the same person, it's just another channel to market,” said Saunders of the medium’s incredible success.

People first
We hear it all the time, “we’re in the business of retail, but we’re really in business of people”. The saying gets bandied about willy nilly by well meaning retail trainers and consultants, but John Lewis Partnership, which owns both John Lewis and high end supermarket chain, Waitrose, is one of the few retail business to have wholeheartedly embraced this concept.

Fourteen per cent of the business’ sizable profits are redistributed to its staff each year, equating to around eight weeks of additional pay a year for every John Lewis employee.

And the rate of redistribution is exactly the same for the chairman as it is the sales assistant in men’s ties.

“Any one of our associates here, could be elected by their co-workers to be a member of the partnerships executive board,” said Saunders.

“The board comprises the appointed directors, non executive directors and one third of the membership of the board are appointed by colleagues from around the business.

“That is unique not just in retail, but in the industry more widely.”

John Lewis Stratford
John Lewis’ eight month old 240,000sqft Stratford store is the company’s first new London store for 20 years.

As part of a commitment to the local council, John Lewis Stratford undertook to offer opportunities to locals on the long term unemployment register.

“Some argue it was a brave and foolish gamble, but we recruited over 850 people into this building, 85 per cent plus of which were new to the partnership, new to retail or just new to employment,” said Saunders of the Stratford recruitment drive.

“Around one third are from the long term unemployed who would not otherwise have had any vague chance of a job.

“It was risky because if I take one of our largest other competitors in the centre, just 15 per cent of the team are new to the business, with 85 per cent taken from existing businesses around London. No other retailer has this proportion of newcomers.

“It's risky because of the culture - will they understand what we're about, will they get the customer service, what’s needed to run a complex department store.

“And if I had my time over again, would we make a different decision? No.

“We wouldn't change it. It's right for the local community. It would have been too easy for us to come into this area with an established group of partners and make a lot of money very quickly.

“But what would that have done for the longer term health of the local economy and for our legacy post the games?”

Saunders revealed that the Stratford store is attracting a higher penetration of customers from the local market than it had initially anticipated (although he conceded that this could still be higher).

But what surprised most, was the level of staff turnover.

“Typical of new department stores, both for the Partnership and the industry, attrition in the first six months, is 15 per cent.

“We were advised here, rightly so, to expect a turnover and loss of numbers in the order of 20 per cent to 25 per cent.

“The turnover rate in the first three months was less than five per cent. The best ever in the history of the partnership.

“We were quite tough though and were very exacting in our requirements in terms of disciplining and grievance procedures, and not letting them off the hook, but at the same time trying to harness the very best we could.”

Saunders sung the praises of the new team, comparing Stratford to Oxford St, which boasts a team of already skilled and experienced workers.

“The biggest challenge I faced in the years I was at Oxford St was shifting the cultural norms to a more positive attitude of greater flexibility.

“Here at Stratford is probably the most demanding John Lewis. If I put a radio call out to say we're tight in department X, I wouldn't have to ask a second time. There’d be a team of people in department X helping out.

“We would not have survived at Christmas, and we took great money at Christmas, had we not had the flexibility of the team.”

* This feature first appeared in the June/July 2012 edition of Inside Retail Magazine. For more stories like this, subscribe to Inside Retail Magazine's bi-monthly print edition here.

Keywords: john lewis, london, inside retail magazine

Comments:

Wednesday, November 21, 2012 by Barry

Great article Carla. It's amazing what happens when you take care of your people. They'll usually return the favour. Less than a 5% turnover rate is outstanding for a department store for the first 3 months.

The all knowing "culture runs down hill" rings very true here.

Barry
barlanconsulting.com.au

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