Blog 5 - Inside John Lewis —— How to deal with fierce market competition?

Black Friday is coming soon. Are you ready to buy your favorite products? Speaking of Black Friday, I think I have to talk about John Lewis - one of Britain’s biggest and best known department stores. It has went through the competition and the worst recession for 80 years. The half-yearly results send shock waves throughout the company, and the pressure is on for the second half of the year. Let's think about how to deal with fierce market competition as for John Lewis and here are some point of views of mine.

workers' bonus

At the beginning of the film, the company worked out how much profit they’ve made, then they set aside the amount of capital they need to invest, and then the balance is distributed as bonus. Before hearing the bonus announcement, an interviewed employee said: "What I’m looking for is 15% but I think it’ll be about ten. The way things are. But ten’s better than nothing." That's quite interesting, Don't you think this is a bit like the theory of bird-in-hand? It states that investors prefer the certainty of dividend payments to the possibility of substantially higher future capital gains, which is similar to workers prefer to get the bonuses in the hand rather than the uncertain gains that the company creates in the investment. To stand out from the competition in the market, the enthusiasm of employees is very important. The increase in bonuses will help to motivate employees to work, so raising bonuses is one way to improve the ability in market competition, however, it will also hurt investment interests. How to find this balance point will be a difficult problem to discuss. In addition, this seems to be difficult to achieve at present, because the reduction of profits can not increase the payment of bonus.



As we can see from the annual report, the partnership bonus is reduced.

Organise events

The video also mentioned the decline in sales. The gross sales growth is 1.0%, down from 2.0% in 2017/18. I know sales is different from gross sales but it still not a good phenomenon. What's more, I found their partnership business model is focus on employees, customers and operations. Fortunately, I discovered and discussed the first element. If talk about customers, it seems they have comprehensive services for them but why the gross sales decline? This may be related to the sluggish economy.



Black Friday and Christmas are coming soon. This is a good opportunity to hold events, but John Lewis has always advocated a pricing strategy of "never deliberately selling at low prices", which reduced the appeal to consumers.

lower the cost

There are many aspects to the cost. Here I take the cost of transportation as an example. A strong and trusted supply chain is integral to them and they aim to conduct all of their business relationships with integrity. They work closely with a diverse range of suppliers from more than 80 countries and it is the strength of these relationships that allows them to source high quality, responsibly produced products for their customers. But the question is, does so many scattered suppliers mean an increase in transportation costs? Perhaps you can find reliable alternative suppliers to reduce some transportation costs.

Reference：
John Lewis (2019), John Lewis partnership annual report and accounts. UCL: https://www.johnlewispartnership.co.uk/content/dam/cws/pdfs/financials/annual-reports/john-lewis-partnership-annual-report-and-accounts-2019.pdf