John Lewis boss: Time for retailers to make some big calls

The sales growth and business development John Lewis has reported in recent years can largely be attributed to the company making bold decisions at the right time, according to the department store chain's managing director Andy Street.

Describing the retailer's decision to make some "big calls" around investment in technology, supply chain and general operations as "the most important" thing the organisation has done as it has continued to grow, Street advised the wider retail industry that "now is the time" to make bold investments in systems and infrastructure.

Street, who was commenting at the British Retail Consortium's (BRC) Omnichannel Retailing 2015 event in central London on Tuesday, revealed that the share of capital expenditure John Lewis directs towards IT has grown from 15% to 37%, as the digital era has evolved.

Such investment for retailers will naturally impact margins and the all-important bottom line, and Street acknowledged that his business – although held in high regard for the way it serves customers across multiple channels – was not immune to the challenges many companies have faced in making money when offering digital retailing.

"In the early years we lost a lot of money online," he told delegates at the BRC event.

"We held our nerve in the tough times to get to where we are now."

Reflecting on the current climate, where retailers are often cautious in making heavy investment in new technology and systems as they wait to see what new patterns of consumer behaviour will emerge, he added: "Depreciation schedules [for new systems] are much shorter, but it's absolutely mission critical we [invest]."

Projects currently occupying John Lewis's time and resources include the recent completion of high level design for Oracle ERP, which will replace the whole supply chain over the next three or four years, as well as the imminent opening of a new distribution centre (DC) in Milton Keynes to run alongside the existing DC at Magna Park. The investment in the central distribution hub represents £200 million of the company's spending alone.

Those working at the UK's larger retailers will argue that John Lewis probably benefits from its partnership status in that there are no City shareholders to keep satisfied – there are no profit and revenue targets it has to promise to external parties and investors. Its shareholders, if you like, are the staff – or partners – who each share the annual profit, relative to their respective salaries.

"We never forget that John Lewis is ultimately a human brand – the unique selling point of the brand is delivered by the partners," Street noted, adding that this mantra "remains absolutely mission critical" before highlighting the importance of remembering "what makes us different".

With John Lewis reporting its annual figures next week following a recent Christmas trading statement that revealed overall sales were again up year on year and 56% of online trading involved click & collect, the business is often held up as a beacon of omnichannel retailing. It was therefore intriguing to hear Street acknowledge, on Tuesday, that the company's "tight estate", comprising 42 stores, has given the business an "historical advantage" over other nationwide retail chains.

That said, Street suggested to be an "omnichannel leader", retailers must have physical stores in all major shopping locations across the country. He also alluded to the importance of not allowing stores to grow tired, saying lack of investment in the physical shopping environment can lead to businesses losing their appeal.

John Lewis's pipeline of new properties, which includes stores to come in Birmingham city centre and Horsham, Sussex, among others, will take the retailer to 50 outlets – and Street indicated that 60 represents the optimum number of properties for his business in the current retailing landscape.

Making sure your retail business is joined up across all channels, be it online, mobile, store or social media, is "what it's all about", he added.