Shopify Ecosystem

High Street Shake Up: How John Lewis Is Adapting To The Changing Retail Landscape

high-street-shake-up:-how-john-lewis-is-adapting-to-the-changing-retail-landscape

John Lewis & Partners are closing eight more stores, after announcing last July that they would close an initial eight stores throughout the UK.

This new round of permanent closures comes after the high-street retailer recorded its first annual loss (£517 million) ever in 2020.

In a press release, Sharon White, Chairperson of the John Lewis Partnership, stated, “The high street is going through its biggest change for a generation, and we are changing with it. Customers will still be able to get the trusted service that we are known for — however and wherever they want to shop.”

First opened in 1864, John Lewis has come to be known for their world-class customer service, and many customers of the prestigious brand travel to visit their stores. But in less than a year, the retailer has chopped about a third of their stores in the UK. “There is no getting away from the fact that some areas can no longer profitably sustain a John Lewis store,” White said.

Despite the 34 John Lewis stores that will begin reopening on April 12, what does this mean for the brand going forward? How will they prevent further closures? And how will they engage customers both online and in-store? 

Why John Lewis Stores Won’t Reopen

The unraveling of the John Lewis empire of stores has been developing for a few years, even after record revenue gains in 2019. The ongoing digital transformation that brands have invested in for many years now continues to catch some retailers off guard, and the pandemic only made that vulnerability more costly.

The Significant Shift to Online

The pandemic-driven shift to e-commerce forced brands to re-evaluate not only their online customer journey but the changing role of physical stores. For John Lewis, that meant deciding which stores weren’t performing or contributing to growth.

From the press release: “Given the significant shift to online shopping in recent years — and our belief that this trend will not materially reverse — we do not think the performance of these eight stores can be substantially improved. We expect 60% to 70% of John Lewis sales to be made online in the future. Nearly 50% of our customers now use a combination of both store and online when making a purchase.”

These changes impact different locales in different ways, but as the Vice Chairman of the Peterborough Civic Society, Toby Wood, points out, this transition to e-commerce is a “stark reminder of how the world is changing.” Everywhere, and in Peterborough, John Lewis was a major retail anchor and employer. “City centers are changing. We have to come to terms with that. We’re not returning to some kind of normal. The new normal is going to be different,” he says.

Changes in Consumer Shopping in Specific Areas

John Lewis’ biggest revelation was that after a massive store expansion starting back in 2007, the retailer acknowledged that they cannot sustain a large store anymore in some locations. They also are cutting back on experimental At Home stores, four of which will close in the towns of Ashford, Basingstoke, Chester, and Tunbridge Wells.

“This follows substantial research to identify and cater for new customer shopping habits in different parts of the country,” the John Lewis press release says. “As part of this, we can unfortunately no longer profitably sustain a large John Lewis store in some locations where we do not have enough customers.”

Not Just the Pandemic

Though the pandemic forced brands to shut down throughout the UK, John Lewis’ challenges began before that. According to their statement, the new eight stores being closed “were financially challenged prior to the pandemic.”

“I’m not surprised by today’s announcement,” a former employee of the Birmingham store, Andrew Taylor says, “While it’s true that customer shopping habits have changed, I believe the partnership was in the middle of an identity crisis before the pandemic.”

After adding 23 stores to their existing 26 in 2007, the company found itself struggling to compete against other retailers in the digital space. When the shift to online shopping came along, John Lewis not only lost in-store traffic and sales, but they had other restructuring and redundancy costs taking a toll on their bottom line. 

But This Doesn’t Signify the Fall of Brick-and-Mortar Stores

Far from it, as discussed by Payal Hindocha, Vertical Product Marketing Manager, Emarsys on the Early Breakfast show on Times Radio:

“It’s unfortunate to see that John Lewis has made this decision,” Hindocha states. “Their brand is known for customer service, and customer service is core to their value proposition.” She implies that there may have been other ways to engage more customers without having to permanently close up shops.

As a stalwart of the high street, this hit to John Lewis will make other retailers wonder if these closings will impact additional high street brands. How will online sales be affected? In the six months of 2020 when John Lewis stores were open, in-store and online sales were neck-and-neck. How will customers react to these new closures now?

Payal Hindocha suggests a cool-headed, data-driven approach.

E-Commerce Has Peaked

The host of Early Breakfast, Calum Macdonald, voiced the fear retailers have right now: “We’re just all losing the joy of going shopping in shops. It’s not for us anymore. We’re all moving online.”

“E-commerce has peaked,” Hindocha responds. “And at peak, e-commerce is all online sales. It’s still about 30% of total retail sales, and some of the research that Emarsys has conducted is that 74% of us in the UK actually still miss the in-store shopping experience, but the role of the high street has changed. And now because people are more used to using their mobile phone or buying things online, they actually now want to go into stores to browse different products or to see friends and family.”

Most Sales Still Happen In-Store

Stores are neither dead, nor on the way out. As John Lewis states: “Our department stores remain critical to our future success. They provide a sensory experience that online cannot, supported by the expertise of our Partners.”

Hindocha backs up this notion: “Most of the time people like shopping in physical stores. I mean, 70% of retail sales still happen in stores. Seeing what happens to the 30% online is really going to be interesting.”

Correlation Between Open Stores and Online Booms

While the retailer stated, “At the Partnership’s full year results earlier this month, we said that we will reshape our business in response to how our customers increasingly want to shop in-store and online,” the real takeaway here goes deeper.

“For businesses like John Lewis or any other retailer, before they make the decision to shut the store down, they need to evaluate everything before that decision is made,” Hindocha says. “By everything, I mean, what’s that going to do to their online business? What’s that going to do to the local economy? What’s that going to do to their customers? Where are the customers going to go?”

To illustrate the cause and effect that in-store and online have on each other, Hindocha refers to the retailer Oasis: “Before Boohoo acquired Oasis, Oasis had store footprint, and when Oasis stores shut down, they could see a drop in their online sales, but when their stores opened up, they could see a rise in online sales. The two correlate, and the two need to be seen together rather than in silos.”

How Retailers Can Adapt to Changes in Shopping Behavior

The good news is that brick-and-mortars still serve a very important role for a brand. It’s just that the role is changing.

The customer perspective has shifted from a somewhat reluctance to engage online to a mass migration to online browsing and shopping, primarily due to the ease and convenience of e-commerce.

According to Emarsys research, 74% of customers say they miss the in-store shopping experience, and they now see the store as a place where they can go and return products they purchased online.

Double-Down on Data-Driven Personalization

The retail revival and economic recovery will be forged on data and how brands leverage it to personalize the customer experience. Clean, unified, first-party data ensures that your brand remains relevant to your customers, but it also allows you to analyze the data to further improve the customer experience.  

Measure the Impact of Marketing on In-Store Performance

Through personalization, brands should be able to clearly see which campaigns and channels are driving in-store visits and purchases. For retailers, this is a shift from online + offline to all channels driving customers back to the brick-and-mortar. For example, in the six months that retail stores were open last year, the whole sector went back into growth — not just e-commerce, but retail sales recovered, and profitable sales were made.

By monitoring and measuring the impact of personalized communications on store performance, brands can review their online and mobile app marketing, and do more of what is working well (and change what is not) before having to make the ultimate decision to close a store.

Online and Mobile

Online channels surged in 2020, and among these avenues, mobile increased massively in usage. But how do stores going into lockdown and perhaps coming back out impact mobile sales in-store?

Emarsys research shows that 48% of consumers say they make the most thoughtful shopping decisions via mobile apps, that this leads to more thoughtful and mindful logical shopping decisions. And 51% now start and finish their purchase journey on mobile. Even if customers are not ready to buy yet, they are browsing and researching through their mobile apps and devices before they make that purchase. So brands have to stay relevant to those customers across every touchpoint until those customers are ready to make a purchase, whether that is online or in-store.

For example, Greggs, a food shop in the UK, noticed a trend in the way customers ordered and paid through their mobile app and then picked up the items in-store. By providing frictionless touchpoints, easier payment methods and services, such as in-app order and payment, Greggs saw a 30% increase in customers using their mobile app.

Like most other retail brands, John Lewis is investing in e-commerce, planning for 70% of its sales to be online by 2025. “Our online customer experience will be strengthened on johnlewis.com and our app,” the retailer’s press release notes. “We’ve already taken our Partners into customers’ homes this past year, using video calls to host more than 11,000 virtual appointments across home design, personal styling, and nursery.”

Payal Hindocha sums up the challenge: “So it’s really interesting to see what’s going to happen because at the end of the day, the customer is going to be the same. Yes, they are more inclined to shopping online, and they are much more used to shopping on mobile devices now. And almost 48% of the customers that we surveyed are much more mindful in how they shop. They’re doing this through the app, or they’re doing it through the apps whether they are shopping online or whether they want to go into a physical store.”

Click-and-Collect

One area where 2020 growth was phenomenal was payment options. Among the ones customers flocked to in large numbers is click-and-collect. John Lewis intends to expand their efforts here: “Our research tells us that customers want more convenient access to John Lewis, so we’re improving the next day Click & Collect service in Waitrose stores and offering more local collection points through third parties.”

Focus on Stores Where Most Customers Shop

The biggest lesson for John Lewis (and every other retailer with multiple physical stores) is to evaluate the needs of each location along with the unique demands of the customers who prefer to shop there. Consumers still want to do more than order products online and pick them up at the curb, and this leaves room for retail to leverage e-commerce to drive in-store performance.  

“Having fewer bigger stores allows us to invest significantly to improve our remaining ones, showcasing our inspiring products with more space dedicated to experiences and services,” John Lewis says. “They will be enticing and exciting places to shop, more reflective of the tastes and interests of local customers.”

Part of John Lewis’ strategy is to simply focus on fewer brick-and-mortars, which will allow the brand to dial in on what customers who frequent those stores want. With e-commerce accounting for 30% of total retail sales now, 70% of sales still happen in physical stores. The problem is that not every store has experienced that same demand.

The stores that will not reopen are in locations where there is not enough customers or demand. However, even customers in these areas can still conveniently shop online with John Lewis. Their partnership with Waitrose adds in popular click-and-collect services, where customers can save on delivery costs and the brand can see profitable outcomes.

Final Thoughts

In the end, by understanding their customer behavior in different regions, John Lewis can plan to operationally run their business more profitably where their customers are. By investing in fewer great stores, the retailer can make these stores places where people want to go and see their product ranges and offerings before either making the purchase in-store or online. 

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Special thanks to our friends at Emarsys for their insights on this topic.
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