Struggling to compete with e-commerce giants, department stores have seen better days. John Lewis, the largest department store in the UK, has been focusing on its online business in response to changing consumer habits.
The retailer, which opened its first shop on London’s Oxford Street in 1864, understands that addressing the demise of brick-and-mortar stores is a matter of urgency.
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Christine Hull is head of product for John Lewis’ online division. Speaking at the Agile Business Conference in London on Wednesday, she said:
We realised that we needed to respond quickly to customer and market trends — the decline of the department store and the rise of new competitors like Amazon.
Unlike other department stores, Patrick O’Brien, a retail analyst at research firm Global Data agrees that John Lewis was quick to adapt to new market conditions. He told Verdict:
John Lewis is noted for its large, and relatively early (compared to its physical store chain competitors) investments into online. It learned well before others that it needed to switch its capital investment into omnichannel rather than rapid store expansion.
BHS and Austin Reed, two of the UK’s best-known department stores with 200 years of trading history between them, collapsed within days of each other last year.
Six months ago, Debenhams, the UK’s second-largest department store, and Marks & Spencer both announced shop closures.
Why is the department store losing out?
Online shopping is on the up.
Total online retail sales have been steadily rising, up £33.17bn this year from 2008 and are forecast to jump a further £17.65bn by 2022, according to Global Data figures.
Meanwhile, retail employment fell by 62,000 last year as the popularity of e-commerce sites reduces demand for high street jobs.
“High street retailers’ real growth area is online, so they are looking at whether they need so many stores and in many cases they are cutting back,” said Richard Lim, chief executive of Retail Economics.
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Online shoppers in the UK spend more per household than consumers in any other country, according to a UK Cards Association report published in April.
John Lewis’ online sales account for 42 percent of sales, according to Hull.
“We’ve seen a footfall shift between physical and digital,” she said.
Has John Lewis done enough?
Although the retailer was early to spot the customer exodus from high street to online, John Lewis’ profits are tumbling and its sales are also in decline.
In the six months to the end of July, pre-tax profit at the John Lewis group slumped 53 percent to £26.6m.
Total sales at the department store group were £86.3m in 2017, down 1.9 percent on last year.
“Sales at John Lewis physical stores are falling and the migration to online may threaten their long term viability, despite the role that stores play in winning online sales,” said O’Brien.
He added that John Lewis has not yet been able to lure customers to its department stores to collect their online shopping, with most John Lewis products bought online collected at Waitrose stores.
Over half of John Lewis’ online orders are collected in stores, but more than three-quarters of these are collected in Waitrose outlets, rather than its department stores.