Why change at the top might not be enough to save John Lewis

Dame Sharon White will make history when stepping down as the boss of the John Lewis Partnership, just as she did when taking the top job at one of Britain’s best-loved shops.
Her announcement that she will not seek a second, five-year term as chair of the employee-owned business makes her its shortest-reigning head. Her predecessors served between 13 and 26 years. She was the first woman to lead the century-old firm, which runs the department store chain and Waitrose supermarkets.
Formerly a high-flying civil servant and head of Ofcom – no hard-bitten retailer, in other words – she was parachuted in to apply some left-field thinking to an organisation facing challenges from shifting shopping habits.
It’s an understatement to say her experience has not been easy. Partly, it’s the nature of the group she inherited. John Lewis has an ownership structure that smacks more of idealism rather than commercial pragmatism; it’s a partnership in which everyone is equal. As a result, John Lewis workers – sorry, partners – are unafraid to criticise management. The staff newsletter, John Lewis Gazette, could sustain a regular show on BBC Radio 4, such is the level of complaint and the accounts of dealing with middle-class shoppers and their never-ending foibles.
Partly, as well, John Lewis occupies a space in the British psyche. It might be a commercial outfit but it’s an institution, a national treasure beloved by its customers, who turn to it for anything and everything. As with the staff, they too love to carp when change is attempted, seeing it as an attack upon themselves and their unyielding traditional values.
There is the industry backdrop. Britain’s high streets are suffering, shops are closing as customers go online. Whale-like department stores appear increasingly incongruous, even where they still exist.
John Lewis may sell thousands of items, including big-ticket household goods; it may have a reputation for reliability and value for money; its assistants may be knowledgeable and courteous. But that’s of little advantage if an online rival can get the same product to your door in a matter of hours, probably for a lower price.
Waitrose is also stuck. Resolutely upmarket, it has struggled to compete with the discount interlopers Aldi and Lidl – which also carry some nice lines in quality, but for much less – and a resurgent Marks & Spencer, which is displaying a knack for innovation.
Put like this, it’s a miracle White has lasted as long as she has. Oh, and she had Covid to contend with.
White has endured a punishing reign. John Lewis reported thumping losses (£234m last year), annual bonuses have gone unpaid, and some branches are permanently shut.
Disappeared, too, is the notion – fashionable for a period among some politicians and Whitehall advisors – that John Lewis represents the perfect ownership model. Nick Clegg, as deputy prime minister, went so far as to suggest it should be the template for the whole economy. Everyone wanted to be like John Lewis, where all the workers had a stake in the business and the flat structure meant everyone pulling together for the common good.
This claim was fundamentally flawed: mutuality only works in the good times. During the bad, tough decisions must be made and those aren’t employees you’re having to lose, but partners. Rancour takes charge with no “owners” to blame; you are the owners, it’s your fault. Poor White had to shoulder a heavy burden.
She ditched one albatross – the time-honoured claim to be “never knowingly undersold” – and was contemplating another by targeting the partnership structure itself. This was out of necessity: John Lewis needs to raise new funding in the order of £2bn to make improvements across technology and data analysis.
It’s here that the weakness of the partnership ideal was exposed; she could not go to the employee shareholders to raise funds… and besides, the mutual is already loaded with considerable debt; so, the only realistic option would be to sell a minority stake, thus diluting its famous structure.
When this plan emerged, the ensuing storm meant it was shelved. That still leaves John Lewis with a problem of how to raise the necessary funds when the outlook for retail is so uncertain. It’s an issue her successor, whoever it is, must face.
Meanwhile, White is leading John Lewis into sharing its premises, downsizing the cavernous shopping areas and using vacant space for rented housing. Also underway is turning areas of stores into wellbeing centres. More John Lewis lines are appearing in Waitrose stores, giving the long-overdue feeling of two brands working together.
It’s hard to see how this will make enough difference, at least not to the degree the partnership requires. There may be some good news. John Lewis accompanied the announcement of her departure with the disclosure that online sales have proportionately fallen and that store visits are up. In the grip of Covid, 81 per cent of sales were online, but this has now fallen back to 57 per cent, while store customers are up 8 per cent on last year.
Writing in the retailer’s annual How We Shop, Live and Look report, Kathleen Mitchell, commercial director, said: “People want to come back to shops, especially on Saturdays. Evening shopping has been replaced by weekend shopping. Customers are eating, drinking, spending time in our shops and enjoying all that our stores have to offer. As many families have discovered, it can be a good-value day out, with a little self-restraint!”
As ever, John Lewis ventures where other retailers do not. Also contained in the report is the detail that the lockdown trend of creating a drinks corner in the living room has fallen out of favour, with sales of drinks trollies down 13 per cent during the year. Drinks trollies; who knew? Only in John Lewis.