John Lewis reported a near-99% H1 profit drop today

John Lewis reported a near-99% H1 profit drop today

Newly re-branded John Lewis & Partners this morning (13 September) announced a near 99% drop in group earnings for the first half of the year on the back of costs related to new shop openings and higher IT costs, as it continues to shape itself for future growth. Despite the glum result, analysts have rejected the claim the result spells the end of brick-and-mortar retailers. Instead, the majority argue John Lewis has a real opportunity to create a streamlined multi-channel offering to cater to the way today's consumer now shops. Physical stores, they argue, are still an essential part of the comprehensive retail offering and complement other means of shopping.

David Brewis, chief marketing officer at Amplience, says:

"Faced with competition from online retailers with huge product ranges, such as Amazon and ASOS, it's difficult for these department stores to continue with a traditional approach to retailing.

"But this doesn't mean that the department store must disappear from the British high street. Remaining stores need to make more impact on potential customers by becoming experiential branded spaces which reflect and enhance the retailers' online offering.

"Today's consumers shop on their own terms, on multiple devices, and expect a constant stream of tailored, high-quality content to stay engaged. In a highly personalised online environment, all retailers must churn out large quantities of content, and fast. Effective content strategy now underpins everything, from brand storytelling through to product imagery through to leveraging UGC. Retailers must streamline their content production processes and adopt the latest tools. This is not only to ensure content is planned consistently across all channels but also to ensure an agile approach to delivering content which is time-sensitive, on-trend or promotional."

Neil Chapman, partner at Infosys Consulting, says: 

"It's no secret that retail revenue is shifting from bricks to clicks. In the last few months alone, we've seen an array of store closures, with prominent UK brands such as Marks & Spencer and House of Fraser closing 100 and 31 stores, respectively. 

"But, despite today's news of John Lewis' slump, it would be an exaggeration to say brick and mortar retail is dead as physical store sales still account for over 90% of total sales in most large markets globally across developed and developing countries. The advent of the Apple retail experience in cities around the world and Amazon's opening of the "amazon go" stores provide recent evidence against the brick and mortar doomsday predictors.

"What we're seeing now is the rise of the "Phy-gital" convergence. Digital engagement is being leveraged to elicit and augment the physical retail experience for the consumers, not replace it"

"Instead, what we're seeing now is the rise of the "Phy-gital" convergence. Digital engagement is being leveraged to elicit and augment the physical retail experience for the consumers, not replace it. Instead of opting for digital-only, leading retail clients are actively using digital outreach to engage with consumers and drive footfall in the retail stores by offering exclusive in-store promotions and attractive shop floor experiences.

"In fact, our leading retail clients are increasingly leveraging the hybrid models where online and offline work together to keep the consumer glued in. A strong digital presence is eminently complementary to keep the consumers engaged and when their high street visit happens, giving them an engaging consumer experience that is best delivered in-store. This collaboration between digital and physical will prove to be the saving grace for the high street retailer."

Anthony McGrath, retail expert and fashion lecturer at the Fashion Retail Academy, says: 

"Technology and online shopping is the main driver of course and this woe on the high street is also going to be exacerbated in urban areas where the fast direct delivery and postal returns model is set to have the biggest impact.

"That puts retailers in Britain's biggest cities on notice, particularly London where companies normally launch their intensive delivery-focused services to take advantage of economies of scale in dense populations. That said, delivery itself is under pressure as customers expect shorter and shorter lead times to receive their orders.

"John Lewis will weather the storm but there could be a domino effect as results like these force other retailers to face up to stark trading realities of their own.

"It's a perfect example of how hard and extreme trading conditions are right now but retailers are taking the fight to online with much greater customisation in store, better communication with their market and increased in-store engagement to drive people into the shops."

Sofie Willmott, senior retail analyst at GlobalData, says:

"Considering the devastating impact that delivering its brand strapline 'Never Knowingly Undersold' has had on profits in H1 2018/19, it is no wonder John Lewis & Partners rebranded last week, stepping up its new strategy to shift the focus away from price and on to service. 

"The retailer is wise to evolve its strategy to focus on its unique business model and strong service credentials to protect its position in the market, while also increasing the proportion of exclusive products and admirably still honouring its customer price promise that it is so well known for.

"The John Lewis Partnership has committed to investing GBP400-500m a year across both its fascias and although this is brave considering its profit performance, it is necessary to ensure the company is differentiated and changes to meet rising consumer expectations. Redundancies this year, unfortunately, coincide with the retailer's investment announcement but it is vital John Lewis & Partners adapts its structure and ploughs money back into its proposition in order to succeed in the challenging UK retail market."