Paula Nickolds, the new managing director of John Lewis, will take the helm in January. The John Lewis lifer will have to address a number of major strategic questions, not least the existential threat facing department stores in an internet age.
1. Department store 2.0
Sales are falling in John Lewis’s physical stores as the internet sucks purchases out of the high street. Like other department store chains, the retailer is having to worker harder than ever to get shoppers through the door amid cautious consumer spending and weak high street footfall. Its newest branch in Leeds boasts an upmarket spa and Benugo cafe but Nickolds will have to come up with other ways to reinvent its stores.
2. Rebuild profits
There are lots of other moving parts affecting the employee-owned retailer’s financial performance. Profits collapsed in the first six months of this year, slumping 31.2% to £32.4m as it invested heavily in the back end of its online business and its Never Knowingly Undersold promise forced it to match rivals promotions. Nickolds could face an uphill struggle in this area as she battles any Brexit related hit to consumer spending.
3. Bricks v clicks
More than a third of John Lewis’s sales are online and Nickolds’ predecessor, Andy Street, predicted they would hit 50% by 2020. This will present the business with a fresh set of challenges as each item sold online generates less profit because of the behind-the-scenes effort involved in fulfilling orders while the company simultaneously services the huge fixed costs associated with running large department stores. Nickolds will have to figure out how to balance the needs of both sides of the business.
4. Partners
The John Lewis Partnership’s USP is that it is owned by its staff, but at its last update in September, the chairman, Sir Charlie Mayfield, signalled tough times were ahead as it grappled with a rising wage bill and the need to become more efficient. It cut 1,500 jobs last year and Mayfield anticipated “we will have fewer partners over time compared with today”. The prized annual staff bonus has fallen for the past three years and Nickolds will somehow have to boost morale on the shopfloor while getting staff to work harder.
5. Growth channels
John Lewis has a small pipeline of stores in prospect but opening acres of new space is unlikely to appeal to Nickolds, who will have to make the 48 she has inherited pay their way. Her Waitrose counterpart, Rob Collins, has put the brakes on further supermarket openings in a tough market and she will have to look for ways to win market share from rivals in what promises to be an unforgiving retail landscape in 2017.
