John Lewis: the omni-channel integration leader in the UK
John Lewis is not like any other traditional bricks and mortar retailer you know. The 150 years old company, owned by its 90,000 employees, managed to successfully transform itself over the years to keep up with constantly changing market trends and retail preferences. With excellence in customer service and satisfaction at the core of what the company represents, John Lewis has been a market leader taking big technology bets to stay ahead of the curve.
In 2011, John Lewis made a strategic decision to redesign its customer experience using technology. The first step was to hire a new IT director to lead the change. British Airways Ex-CIO, Paul Coby, joined and started an omni-channel overhaul. Paul decided that the only way to keep the historic level of customer excellence and to move the company forward, each channel (brick-and-mortar, call center, online, mobile) has to act in synergy. Until then each channel was developed as an isolated end-to-end provision. The retailer had a long way to go. The electronic point of sale system (EPoS) has not been refreshed since 1990 and the supply chain and ordering system did not allow for tracking products and orders across channels. With 60% of John Lewis customers buying both online and offline, the company had to adapt.
What did John Lewis do to create a seamless customer experience?
Three strategic business objectives were set: Track, Know and Manage. The idea was to be able to track every item from factory to warehouse to customer and back again, if an item was returned. The objective was not only to understand what customers are buying, but to forecast demand based on what might they buy in the future via any of the channels.
In order to execute on the strategy, the company set up a new EPoS system, implemented a new web platform and a new order management system that had the ability to track orders cross-channels. It also replaced its single channel supply chain system with a new cross platform. As a result of those changes, in 2009 John Lewis pioneered click-and-collect purchasing option, now an industry standard.
Was it successful?
The change was not easy. Firstly, it required large upfront investment (GBP 40m) and maintenance spending. Since the beginning of the IT revamp, sales grew at double digits, but profits declined. The first half of 2016 profits were down 31.2% from prior year, and the retailer pins more than half of the decline too transitioning costs in its distribution network. The management is however optimistic about the future, stating that new systems will eventually pay for itself and help the company grow. We are yet to find out if it is true. However, the biggest challenge was the cultural shift needed for full technological integration. Employees had to get used to the new systems and the IT operations team had to learn to support bigger and ever growing estate.
After the initial omni-channel integration John Lewis has been experimenting with various new ideas. In 2012, it tested a virtual mirror pilot in its flagship store at Oxford Street. Customers could “try on” outfits simply by standing in front of a screen displaying them wearing the virtual garments. Shoppers could then have details mailed to them. In 2014, it launched JLAB – a tech incubator venture aimed at finding and funding five innovative retail start-ups. The program just run for the third year. The retailer also experimented with a full omni-channel physical store in Exeter, where customer could use 3D cameras, QR codes and e-paper price tickets during their brick and mortar shopping experience.
Despite the investments John Lewis still has a long way to go. Where it gained market edge by benefiting from the first mover advantage, it lost it to other large UK retailers that were quick to catch up and in some cases exceed John Lewis’s efforts. For example, Selfridges also implemented the click-and-collect system, but it exceeded John Lewis by focusing on creating distinctive and elegant gift-box like delivery packaging, ensuring minimal cost while compensating customers for the lack of physical store shopping experience. In addition, being the market innovator, John Lewis took a lot of high risk bets (e.g. the virtual mirror), which did not pay off financially (although it did create media buzz). Going forward, and giving the declining profits, the retailer should focus on more targeted IT and digital spending. Finally, unlike the competition, John Lewis should work on its customer loyalty programs. Right now, from a customer standpoint, there is no incentive to choose John Lewis over some its competitors – the other luxury retailers or Amazon.
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Student comments on John Lewis: the omni-channel integration leader in the UK
Interesting article. Reflecting on my own experiences of retail shopping for myself and my wife, I feel there are a lot of inefficiencies that can be solved. For example, why do I need to always ask the staff if they have ‘medium’ size of the dress that I like – can’t they make this information transparent to the customer. The moment you select a dress, you should easily know whether a different size / color of that dress is available and moreover, you should electronically be able to request to see that size / color. This will really simplify the process of staff running back and forth in the store. I do believe that there is a place for offline stores especially for luxury retail as customers want to touch / feel / try out what they want to buy. Also, luxury shopping is an experience which the online world might not be able to replicate. However, they need to fix some of the inefficiencies with better use of technology.
Really interesting article as I love John Lewis – thank you Julia! John Lewis’s aggressive target of 40% of sales online by 2020 is interesting . In the past year John Lewis has injected cash into an easier-to-use website, equipped in-store partners with transactional tablets and tied up with Google to map the inside of its flagship Oxford Street store . Through these investments I believe they can improve their operating model by increasing in-store efficiency through requiring fewer ‘partners’ to help customers navigate the store and shorten the check-out time through Apple-style on-the-shop-floor checkout via the tablets.
1 – http://www.performanceinpeople.co.uk/blog/john-lewis-at-150:-6-ways-john-lewis-changed/
Thanks for the article! Click & Collect is much more advanced in the UK than most other countries, and whilst it may sound simple to treat your stores as mini-warehouses from which you can fulfil online customer orders, it is actually extremely painful as it involves a complete overhaul of the distribution system. You need to track stock of every single item in the store to be able to offer customers an accurate view of availability when they are browsing online, which is far easier said than done! Another UK retailer, Argos, is also very advanced in this regard. They operate over 800 stores in the UK and have a real-time view of every SKU across its entire estate – over 1/3 of their sales are made through click and collect so having an accurate view of stock is critical to the business’ success!