How John Lewis is changing its business model for Omni-Channel

The impact that omni-channel is having on retail supply chains was highlighted by Dino Rocos, operations director of John Lewis, when he opened the Omni-Channel conference in Birmingham yesterday.

Retailing is changing fundamentally. A hundred years ago the retail environment was very personal to the individual. By the 1950s the market was moving to mass retailing.

But now the market is moving to the next stage: “mass personalisation”, he said.

Historically, bricks and mortar worked well for John Lewis for 140 years. But 12-15 years ago the market changed with the rise of internet shopping creating new sales channels.

However, said Rocos, “we shouldn’t be segmenting customers into the channel.”

He pointed out that a customer today might examine a product in-store, buy it online, and the collect it from a store.

“Omni-Channel for is about a seamless experience for our customers,” he said, pointing out that  when you get it right and customers spend more across the channels.

Rocos highlighted the importance of stitching together the difference elements. We started with click and collect and today 55 per cent of our internet business is click and collect. Only 45 per cent delivered to customer.

The one thing that hasn’t changed for John Lewis is the fundamental base of business: value, assortment, service, trust. The retailer’s business falls into three equal segments: fashion, home and electricals.

Getting staff to buy into the process was also critical, he said. One way has been to allocate online sales to individual branches so that internal perceptions don’t get in the way.

John Lewis has been investing some £400 million in its supply chain to meet the demands of omni-channel.  Its change programme, entitled Programme Q has four key elements:
1. Getting the right stock in right place at right time
2. And agile supply chain that exploits scale to drive efficiency
3. Empowering partners driving operational excellence – more comprehensive package of training to give staff skills.
4. Fulfilment beyond customer expectations

Rocos went on to analyse some of the challenges facing retailers. The first was moving from a “mass” retail proposition to “mass personalisation”. “Do you have clarity over proposition? You need to understand the customers and where they are on their journey.”

There is also a financial challenge to align financial reporting to the Omni-Channel world.

And in supply chain, there are challenges of speed, synchronisation and agility on end to end basis.