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The Story of the John Lewis Partnership

Last of a six-part series by Peter Cox, an East Finchley author.

Remember when shops weren’t allowed to open on a Sunday?  It became legal in 1994, after stiff resistance from the Keep Sunday special campaign, strongly supported by John Lewis.  The reason for that support was not hard to find.  John Lewis department stores’ success in the previous forty years had been based on the ability to keep its opening hours down, and with it its staff costs.  Its shops outside London were closed then all day on Mondays as well as Sundays, so they had to bear the costs of opening for just 46 hours a week.  It was a brilliant and inexpensive operating model, as long as your loyal customers were prepared to accept their inability to shop on Sunday and Monday.  Moreover, John Lewis was able to maintain a policy of never advertising, which it regarded as a guaranteed way of losing money for doubtful benefit.  And it still didn’t take credit cards, except its own, which charged no interest, because in a business where margins are tight – and they did and still do genuinely mean it when they say Never Knowingly Undersold – the credit card companies cream off well over 1% of the price of the item.

For ten years after the introduction of Sunday trading, John Lewis battled against the tide, but by the middle of the last decade it could hold the line no longer.  Now its shops are open every day of the week, around 70 hours instead of 46, half as much again.  That’s a costly increase in staff costs unless it yields the same lift in sales, which it can’t possibly do.  By then, too, they’d accepted too in the 21st century credit cards were essential, and that they’d have to advertise.  That increased ’cost of doing business’ meant that its profit margins have never reached the level they enjoyed before the end of the 1990s.  And yet it has been able to pay an annual Bonus that still averages around 16%.  How come?

One reason is the burgeoning success of Waitrose, which, as we saw last month, became an increasingly influential player in the food market, the standard bearer for good quality food, reliably and fairly sourced.  Another was the meteoric rise of John Lewis’s Internet business, which most clearly of all exemplified the shedding of its conservative, buttoned-up image of the last century.  Slow to start originally – it let Waitrose make all the running – it made unexpectedly good use of the imminent failure of Buy.com, one of those Internet bubble trading companies that burst onto the scene and then burst, literally, in the early 2000s, by taking it over.  At a stroke John Lewis had retrieved two years development it had lost by its early caution.  In 2009 the sales of its Internet arm passed those of its flagship Oxford Street store, which itself took twice as much money as any other, and it has now left it far behind.

Moreover its advertising, non-existent until recently, has become so successful that its heartstring-tugging Christmas TV ad is starting to become a cliché.  John Lewis’s emergence from its self-imposed monastic cell has moreover led to its employee ownership model being touted as a cure for the seriously flawed free-market business model, where shareholders no longer – if they ever did – attempt to hold company boards to account.  The John Lewis Partnership board has an equal number of directors elected by everyone in the business to the number appointed by the Chairman.  His salary is limited by a multiple of the average pay of a shop assistant, one enshrined in a constitution which defines the Partnership’s ultimate purpose as:

‘…the happiness of all its members, through their worthwhile and satisfying employment in a successful business’.

Peter Cox’s book Spedan’s Partnership – the Story of John Lewis and Waitrose – can be bought for £20 at all good bookshops, and at £15 incl P & P from his website www.spedanspartnership.co.uk.

 

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