John Lewis Company in the UK - Essay Example

Retail Marketing number} Introduction and Background The chosen industry is the retail industry that is concerned with the sale of physical goods through the use of fixed locations that are often better known as shops or stores. Over the years the retailing industry has also grown into newer selling strategies such as providing delivery based services, using the internet to boost sales and the like. The domain of these new support activities is also considered to be part of the retailing industry. The retailing industry is essential to the modern consumer culture that depends on the speedy delivery of goods to the consumer in the market. A typical retail outlet may range from a handful of goods to entire shopping lists depending on the size of the retailing company. Historically retailing businesses in Great Britain have often diversified their total offered lineages as well as putting a focus on expansion since long. The first appreciable move towards assuming a large retailer framework is evident from the early business strategies of John Lewis Partnership that has been chosen for the sake of analysis. The company started out as a simple store but soon the owner John Lewis procured a few other stores before the First World War. Later his son introduced a novel framework for retailing by introducing an employee led partnership. After his death the entire business was bequeathed to the employees of John Lewis Partnership and this has continued as is since 1925. 1.1. Current State of the John Lewis Partnership At this point in time the John Lewis Partnership has diversified its business interests such that it owns and operates John Lewis departmental stores, the Waitrose supermarkets as well as a number of other services. The company is still owned by its current employees who are designated as partners. These partners all have an effective say in the manner in which business is conducted. Moreover each partner is provided with a piece of the annual profit of the company which generally ranged between 5% and 20% of the pays of partners throughout an average year between 2000 and 2011. 1.2. Market Standing Currently John Lewis Partnership stands out as the third largest private company in the United Kingdom with a revenue of 6.74 billion pounds in 2009-2010 (The Sunday Times, 2010) along with some 76,500 employees on the pay roll in 2010 (Madelaine, 2011). In addition to the above, John Lewis Partnership has become the United Kingdom’s “best high street” website after it took the place from Marks and Spencer’s in October 2010 (Bold, 2010). John Lewis also serves as the supplier for the Ocado web supermarket chain. Ocado is supplied with the Waitrose brand food products as well as with other non food items from John Lewis directly. Overall the image of the John Lewis Partnership brand and its affiliate’s image are upmarket. Historically John Lewis has appealed to the more fiscally independent customers namely customers present within the middle and upper classes. 2. Retailing Issues 2.1. Drop in Purchasing Power The downturn that has been visible in the global economy since 2008 has had the consequence of lowering the spending levels available to the average consumer. The drop in purchasing power has been all the most noticeable in the North American and Western European markets that were deemed as the markets with the greatest consumer purchasing power. The British market has felt similar problems as well when it comes to purchasing power. Overall consumers are spending less and less when it comes to commodities that are often stocked by retailers. In this respect the overall trend in the British retail industry reflects a slowdown as well. The emergence of other phenomenon related to the recession based phenomenon such as the Euro zone crisis have also shaken consumer confidence in spending at previous levels. Moreover a number of consumers are already spending less in an effort to save more money to avoid situations that they previously faced. Overall these phenomenons have also contributed to lowering of available spending levels that are open to customers. In turn these lowered spending levels have affected the retail industry throughout the entire world. 2.2. Decreasing Profit Levels British retailers such as John Lewis have also had to face similar problems as their generated revenues have fallen. For example John Lewis claimed a retained profit of 198.7 million pounds for the fiscal year 2007-2008 while the profit dipped to 146 million pounds in the fiscal year 2008-2009. Although the profit has increased slightly after that to 155.3 million pounds for the fiscal year 2009-2010 but the increase in profits is nowhere as large or strong as before. The retailing industry is highly dependent on end consumer income levels in order to sustain their business. Already John Lewis can be seen divesting from its historical components and projects due to lowered profit levels. For example, John Lewis chose to divest in its textile manufacturing business around 2007 located in Carlisle, Haslingden and Lancashire given its constrained fiscal situation as profit margins were receding (John Lewis Partnership, 2007). These manufacturing businesses had been associated with John Lewis Partnership since 1934 and produced for the retailer exclusively providing it competitive edge over other retailers available in the market. Although these business had not been profitable for over a decade now but John Lewis had chosen to value the partners employed here by dealing with their fiscal problems. However a lowering of John Lewis’ own revenue levels has meant that the retailer has moved out of these businesses altogether. In a similar manner John Lewis has also chosen to move away from some of its previous investments in order to create more liquidity for its own survival. Moreover the retailer is revisiting its previous investment strategies in order to invest more innovatively in an already strained market. John Lewis already owned around 29% of Ocado shares. Ocado was involved in the online sale of John Lewis’ food products that are available under the Waitrose brand name. However due to increased market competition and lowered sales volumes John Lewis chose to remove itself from the project altogether. Eventually John Lewis managed to divest itself fully from Ocado in February 2011 (BBC, 2011) and its decision for divesting itself lead to a 10% drop in Ocado shares reflecting lowered investor confidence levels. 2.3. Diversification of Consumer Portfolio Previously John Lewis chose to deal exclusively with upmarket customers and consumers that belonged to the upper and middle class and therefore had more to spend than the average consumer. However a lowering of the income levels of John Lewis have prompted the retailer to diversify its portfolio to include all levels and kinds of consumers in order to boost sales and drive profitability up. In order to deal with these challenges, John Lewis has chosen to increase its overall lineage for both the John Lewis brand as well as for the Waitrose brands. The John Lewis brands have begun to include a new range of products under the “Value” range that has been offered all around the country in various stores simultaneously. In a similar manner the Waitrose brand of John Lewis has come up with the “Essential” range in order to include all kinds of customers to its sales volume portfolios. 2.4. Greater Business Creation Another major strategy that was being used by John Lewis to create more business was to offer services under a new company known as Greenbee. However the onset of the economic recession has forced the merger of the Greenbee framework into the overall John Lewis Company in order to provide Greenbee with fiscal augmentation. The move to incorporate Greenbee into the overall John Lewis brand directly came through in late 2010 (Farey-Jones, 2010) after the company chose to invest more heavily in the insurance sector than in the provision of services alone. This has had the advantage of adding more products to the overall John Lewis brand name that would eventually help the retailer augment its overall investment portfolio and sales strategy. 3. Suggested Strategic Marketing Responses 3.1. Strengthening Current Brand Image The John Lewis Partnership brand name dates back to the early twentieth century. Typically the retailer has targeted upper and middle class clients only so the brand’s image is highly strengthened in these classes. However the recent move to expand the customer base means that the brand name would need greater recognition in the newest class of customers being introduced. This is all the more important as competition in the retailing sector is booming due to the lowered consumption levels of the average consumer. In order to strengthen its position in the market, John Lewis ought to spend resources and time to popularise its brand name. The more popular John Lewis becomes, the easier it would become for the retailer to survive in the market amidst competition especially in enervated economic circumstances. This move is similar to what Mercedes Benz did when faced with weakened sales as it chose to diversify into the lower spending classes of customers. The same may work well for John Lewis too if executed with the right marketing mix (Krafft & Mantrala, 2006). 3.2. Diversification of Marketing Mediums The onset of newer marketing mediums such as the internet and the social networking domain has meant that all kinds of sellers need to go online in order to augment their existing customer base. John Lewis has had a feeble online presence although its website has crossed to the best upscale website of the year. However John Lewis needs to concentrate more than just on its website as it needs to approach more and more customers through network marketing, using social access platforms, viral and guerrilla marketing etc. John Lewis also needs to popularise itself by placing promotions and sales packages online on its website and on various social networking websites. The newer generation of customers would also require John Lewis to develop newer version of apps for smart phones. Such apps already exist but would need to be updated in order to appeal to the newer class of clients being targeted (Mitchell, 2008) 4. Bibliography BBC, 2011. Ocado shares hit after John Lewis sells stake. [Online] Available at: HYPERLINK "http://www.bbc.co.uk/news/business-12428399" http://www.bbc.co.uk/news/business-12428399 [Accessed 16 January 2012]. Bold, B., 2010. John Lewis beats M&S as UKs best high-street website. [Online] Available at: HYPERLINK "http://www.marketingmagazine.co.uk/news/1035596/John-Lewis-beats-M-S-UKs-best-high-street-website/" http://www.marketingmagazine.co.uk/news/1035596/John-Lewis-beats-M-S-UKs-best-high-street-website/ [Accessed 15 January 2012]. Farey-Jones, D., 2010. John Lewis drops Greenbee brand and focuses on insurance. [Online] Available at: HYPERLINK "http://www.marketingmagazine.co.uk/news/1029176/John-Lewis-drops-Greenbee-brand-focuses-insurance/" http://www.marketingmagazine.co.uk/news/1029176/John-Lewis-drops-Greenbee-brand-focuses-insurance/ [Accessed 16 January 2012]. John Lewis Partnership, 2007. Diversification. [Online] Available at: HYPERLINK "http://www.johnlewispartnership.co.uk/Display.aspx?MasterId=dbfd085b-df14-4605-8547-d947213112b2&NavigationId=549/" http://www.johnlewispartnership.co.uk/Display.aspx?MasterId=dbfd085b-df14-4605-8547-d947213112b2&NavigationId=549/ [Accessed 16 January 2012]. Krafft, M. & Mantrala, M.K., 2006. Retailing in the 21st century: current and future trends. New York: Springer Verlag. Madelaine, N., 2011. The salaries and distribution of John Lewis. [Online] Available at: HYPERLINK "http://archives.lesechos.fr/archives/2011/lesechos.fr/03/10/0201211642896.htm" http://archives.lesechos.fr/archives/2011/lesechos.fr/03/10/0201211642896.htm [Accessed 14 January 2012]. Mitchell, P.H., 2008. Discovery-Based Retail. London: Bascom Hill Publishing Group. The Sunday Times, 2010. UK CF Top Track 100. [Online] The Sunday Times Available at: HYPERLINK "http://www.deloitte.com/assets/Dcom-UnitedKingdom/Local%20Assets/Documents/Services/CF/UK_CF_2010TopTrack100supplement.pdf" http://www.deloitte.com/assets/Dcom-UnitedKingdom/Local%20Assets/Documents/Services/CF/UK_CF_2010TopTrack100supplement.pdf [Accessed 14 January 2012]. Read More