John Lewis, the worst crisis of the British ‘El Corte Inglés’

John Lewis, the worst crisis of the British ‘El Corte Inglés’

2023-05-19 10:10:42

LondonIn a time of online business and shopping via an app, a click and the arrival of a van at the door, department stores become the possibility of a Saturday afternoon experience: not that be it just to do window shopping, look without buying In London, an ideal setting, in the opinion of this chronicler, is the department store PeterJones, of the John Lewis Partnership. Specifically, those in the heart of Chelsea, where King’s Road meets Sloane Square, rather than those on the major commercial axis that is Oxford Street.

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The building is a marvel of British modernist architecture. From the top floor, where there is a battle restaurant, you can see Battersea Power Station, the Shard, the London Eye and nearby rooftops, showing a taste of the city’s diverse constructions.

When the current Peter Jones/John Lewis was built between 1934 and 1937, the surrounding streets of Dutch-style, red-brick buildings gave the area a Victorian feel. Today they still evoke it and the contrast with the glass and steel of the facade of the new structure is a beacon of modernity amidst so much tradition. But not only architectural, but also business.

Because John Lewis Partnership is the UK’s largest co-operative, synonymous with responsible capitalism in times of irresponsible capitalism. Until now, each of the group’s 74,000 employees is a shareholder and is – or was – entitled to an annual bonus proportional to their salary and the profits of the business.

The mutual company controls not only the department stores but also the Waitrose supermarket chain. Both are the big brands of the British middle class. Buying food, living room or garden furniture or bed linen is a symbol of a certain social status.

Millions of losses

But Amazon, Google and the virtual world threaten the model, shaken enough by the pandemic. The cooperative has recorded pre-tax losses of 270 million euros in 2022; global sales fell 2% to 13.8 billion, and in March, for the second time in three years, bonus payments were canceled. The situation has worsened considerably in relation to 2021, one of the years of covid and restrictions, as 31 million euros were lost.

One of the company’s slogans, which appears in the articles of association, is that benefits must be “reasonable and sufficient.” John Lewis Partnership officially disdains the culture that represented the Gordon Gekko of Wall Street, according to which “greed, for lack of a better word, is good; it’s right.” “Greed in all its forms,” ​​said the character played by Michel Douglas.

But after the results were presented, the firm’s new chief executive, Nisk Kankiwaka, warned that department stores and supermarkets were “not producing enough profit”. Kankiwaka has said that change is needed. “Partners and customers love our business and want it to improve, but we’re not currently making the profits we need. Profitability is crucial so we can invest in our partners, our infrastructure and our technology.”

What should be done, then? The alternatives are not many. The classic of cuts – so far, one billion euros –, store closures (one in three), layoffs, retirements or incentivized leave; also resort to reserves – around 1,300 million -. But if all this does not end in crisis, the only solution is to sacrifice the cooperative model and accept an injection of foreign capital in exchange for a minority stake in the form of shares. The president of the board of directors, Sharon White, opened the door shyly: “[El model] it will continue to evolve and change shape, but what will remain a constant is our ownership of the business.” White maintains that management would discuss any radical proposal – selling shares – with its 74,000 employees.

As John Lewis decides which path to take, he has tried a middle ground for now, although some have already seen it as almost treasonous. And it is that at a crucial moment for the future of the company they have decided to change advertising agency. And perhaps, paradoxically, John Lewis has turned to the one that propelled Margaret Thatcher to power in 1979. Saatchi & Saatchi has confirmed itself as the lead creative partner for all the co-op’s advertising activity. In 1979, a poster he made for the conservatives made history in the country’s politics. “Labour doesn’t work. Britain is better off with the Tories,” it read, at a time when unemployment was skyrocketing by British standards.

John Lewis founded the company in 1864. The premises were then a cloth warehouse in Oxford Street. It was his son, John Spedan Lewis, who transformed it in the late 1920s, turning employees into mutualists and making them participate in decision-making. This is the story that Saatchi & Saatchi inherits. And the challenge is to run a campaign on land, sea, Twitter, Tik Tok and TV that makes the British middle classes think that shopping at John Lewis is as important as continuing to listen and watch the BBC. Today, however, both models are under threat. And it’s no coincidence in a country that doesn’t seem to raise its head and where symbols melt like butter in a fire.

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