John Lewis: Searching For Closure

In July 2020, John Lewis announced they were closing 8 stores, affecting 1300 employees. Fast-forward to March 2021, and history appears to be repeating itself, as John Lewis has confirmed it intends to permanently close another 8 stores, affecting a further 1500 jobs.

How does John Lewis compare with the High Street as a whole? In lieu of physical, tangible shops, what other options might John Lewis explore to sustain profitability? Are John Lewis simply another High Street brand that has suffered due to the effects of Covid-19, or is this ultimately a consequence of its own actions and business model? 

Hopefully this article will provide some closure. Pun intended.

Store Closures:

The pandemic has affected every business, but John Lewis appears to have suffered far worse than most High Street stores, closing roughly one-third of all its stores. In the 157 years it has existed, John Lewis had never made an annual loss… until 2020. Last year, John Lewis suffered a massive £517 million annual loss. Much of this loss was down to refurbishment — making shops ‘covid-safe’ — as well as redundancy costs, and a decrease in the value of shops as online sales increased. It is worth noting, however, that sales only fell 4% throughout the year, despite almost 20 weeks of store closures. That means that John Lewis’ annual loss was primarily not due to poor sales.  

So, what’s the big issue? Why the store closures? Shops will eventually reopen, so why not hang on to those stores? As we have established, those stores are profitable… or are they?

Delve deeper into the figures, and the reason for the store closures is blatantly obvious.

Prior to the pandemic, 42% of John Lewis’ sales were made online. Now, they make up 75%. John Lewis’ overall sales may have only marginally decreased, but the number of sales made in-store has plummeted. That isn’t particularly surprising, given lockdown restrictions imposed on non-essential retailers in the UK, but clearly John Lewis feel that the commerce it used to enjoy within its stores will not return. 

John Lewis is committed to reducing the number of stores they maintain. But John Lewis is not the only brand facilitating store closures. Ultimately, this is a trend that hundreds of brands, new and old, are following. The national lockdown has served to accelerate the usurpation of physical stores by the more popular alternative: online shopping. Businesses such as John Lewis and Debenhams have begun to recognise the ease and accessibility provided by online shopping: a more attractive, and more viable alternative to tangible stores. The trend we are witnessing is years worth of change in a much shorter period. 

John Lewis vs The High Street:

It is easy to look at John Lewis as an isolated incident. A brand we love — a household name — beginning to crumble.  In reality, however, these store closures are unsurprising. Over the past decade, High Street shops and independents have battled to stay afloat as the tsunami that is the internet and online shopping washes over and replaces them. The pandemic has simply served to catalyse this change. In 2020, there was a net loss of 9,877 chain store shops across the UK – nearly 10 times the number that closed in 2015! As online sales soar, the demand for physical interaction in-store declines, and with it goes High Street stores. The popularity and ubiquity of the internet is a hard pressure to resist.

Thought prompt: If you were a lawyer, how would you advise John Lewis?  Would you suggest that the company follows the trend of store closures and focuses on developing its online presence? Or would you advise John Lewis to hang on to as many stores as possible, in the hope they would become extremely profitable upon reopening as so many competitors close their doors permanently?  

High Street shop closures are nothing new, and affect every major retailer: John Lewis is just another brand that has been forced to reevaluate the necessity of its stores in light of the capabilities provided by the internet. However, John Lewis has become the focus of every major news platform and media outlet in the UK, not to mention yours truly. 

The reason why? Goodwill.

Goodwill is an intellectual property right — essentially the customer’s interest or investment in a business. Customers are attracted to John Lewis as they associate it with values they trust and identify with. John Lewis exhibits a certain ambience and culture. Examples of this include:

• Annual John Lewis Christmas advert
• Staff bonuses
• Partnership scheme. 
• John Lewis founded a medical service providing free staff healthcare 19 years before the NHS was founded. 

John Lewis has a reputation for helping local communities, not to mention its own staff. That is why so many people are taking note of its store closures, redundancies and remodelling. Consumers are upset, outraged, devastated. For example, a petition in Sheffield, which at the time of writing this article, has over 20,000 signatures, has been launched to help keep the store open. 

As John Lewis closes its stores, will the goodwill — the trust and confidence its customers have in it as a brand — begin to fade? Are John Lewis driving towards failure if they take away the physical proximity and the associated goodwill provided by and contingent on physical stores?

It isn’t all bad news for the John Lewis Partnership though: Waitrose, a subsidiary of the John Lewis Partnership, made an operating profit of £1.15 billion in 2020, an 8% increase on the year before. Moreover, Waitrose saw a 182% increase in online grocery shopping.  

Just as the internet can facilitate success for one aspect of a business, it can equally facilitate failure. Irony at its finest.

An Alternative?

Despite the 16 John Lewis store closures announced over the past year, the John Lewis Partnership plans to direct £800 million of funding into improving and developing John Lewis as a business — including current stores — and a further £75 million to cover restructuring costs.

Thought prompt: What alternative options might John Lewis explore? If John Lewis was your client, consider which of these options you would advise, as well as the advantages and disadvantages of each. The infographic below explores some of the options you might consider to sustain John Lewis’ profitability.

John Lewis to Blame?

We have looked at John Lewis’ store closures, compared those closures to the rest of the UK High Street, and discussed some alternatives John Lewis might explore, but it is worth considering whether John Lewis may have brought this catastrophe upon itself.

In 2007, John Lewis began an expansion, nearly doubling the number of stores in just a few years. Perhaps the extra accumulative costs for each store and its staff are contributing to the mass closures John Lewis is experiencing now.  

No one could have predicted the pandemic (apart from Bill Gates, apparently), but nonetheless, was a massive expansion an appropriate, or even a sensible investment?  Or would an investment in a more advanced website and a greater capacity for online ordering and delivery have been a better option?

Arguably, John Lewis is merely reaping the consequences of its own antiquated business model.

Conclusion:

This article has focused on John Lewis. But, if you are to take anything from this article, do not dwell on John Lewis as an anomaly. John Lewis is merely a case study serving to demonstrate and exemplify the breakdown of the High Street as a whole. 

The perpetrator? The internet. 

As John Lewis, Debenhams and thousands of other brands abandon the traditional paradigm of retail to the unapologetic pervasiveness of the internet, consider the implications for you, your friends, your family, and your clients.  

In 10 years, how many shops will remain open?  Will we submit to the digital and the intangible, or is physical interaction a necessity for retail, and associated goodwill, to effectively operate?

This article was written by Toby Johnston. Toby is a Content Writer for According To A Law Student and first-year Law LLB student at the University of Liverpool. Toby has aspirations to become a corporate solicitor.