John Lewis Set To Introduce New Pricing Strategy

After posting disappointing year-end results yesterday, the John Lewis Partnership revealed plans to roll-out lower prices next month across the product ranges in its department stores.

As part of its turnaround plan, Chairman Sharon White explained that John Lewis had assessed its pricing structure and readjusted its entry price points, with changes kicking in when stores start reopening after lockdown restrictions ease in April.

“We’re really going to be dialling up our focus on value with new pricing later this year – we want customers to think, ‘Gosh this is John Lewis quality, but at prices that you wouldn’t expect,’” she said.

However, Pippa Wicks, Executive Director of John Lewis, stressed that the chain will not be “Argos for the middle class”.

The Partnership warned yesterday that not all of its department stores will reopen on 12 April with more permanent closures in addition to the eight announced last year.

White said today: “Hard as it is, there is no getting away from the fact that some areas can no longer profitably sustain a John Lewis store.”

However, the group will be pushing ahead with its recovery programme with plans to increase spending to around ￡800m over the next year developing and improving various key areas such as digital, stores, and product ranges.

Commenting on yesterday’s results, Zoe Mills, senior retail analyst at GlobalData, highlighted the stark contrast in performance between John Lewis and its sister chain Waitrose.

She said: “The John Lewis Partnership’s full-year results highlight parallels to Marks & Spencer, as its food & grocery business drives growth while its John Lewis arm underperforms.”

Mills added: “The role of online within its John Lewis business has drastically changed over this financial year, with the channel now accounting for 75% of total sales compared to 42% in FY2019/20, and is somewhat responsible for its only minor decline of 1.3% in revenue to ￡3.73bn this year. Another reason is its strong electricals & technology department. Its tech category mix increased from 35% to 45% this financial year as TVs, computers and games consoles were in high demand. In comparison, reflective of the overall UK market, its fashion department suffered as demand for workwear and formalwear fell.

“Dame Sharon White has bold plans for the department store, with the retailer’s five-year Partnership Plan announced in late 2020, highlighting that it is willing to adapt to the changing retail landscape. Its plans to expand into smaller local stores containing the ‘very best of John Lewis’, will appeal to shoppers looking for greater convenience as well as increasing its reach among customers that are not in the catchment of its bigger department store estate. It had already announced the closure of eight stores after the initial lockdown in the UK earlier in this financial year, but further permanent closures are imminent as increased costs threaten more locations.

“In stark contrast to its non-food business, Waitrose has had a strong year, with revenues up 10.5% to ￡7.04bn, despite seven store closures during the period. Growth has been driven by a fourfold increase in sales through Waitrose.com, with online grocery sales also up 182% during the peak trading period. The grocer’s online strategy has evidently paid off, with the online channel mix now 14% compared to 5% in FY 2019/20 (excluding sales to Ocado). Its trial partnership with Deliveroo has also appealed to a new younger shopper and given its success should be expanded upon in its new financial year. With other grocers focusing on price and value for money, evident by price investment and price-match schemes from the likes of Tesco and Sainsbury’s, Waitrose must still ensure that its point of difference is firmly outlined to remain relevant to its widening customer base.”

NamNews Implications:

• ‘Gosh this is John Lewis quality, but at prices that you wouldn’t expect,’
• …can be a two-edged weapon:
• ‘Were they overcharging me before?’
• or ‘Have they reduced quality as well as price?’
• The Waitrose/JL performance difference increasingly becoming a case for separating the two business models…