When Good CX Isn’t Enough

14/01/2020 By Matt Costin

I like John Lewis. I like Waitrose too. After all, what’s not to like? If they were likeable enough as individual retail entities, they are utterly wonderful in combination. Or perhaps I should say, ‘in Partnership’?*

*Dad Joke.

Imagine you are on the train home from work and you suddenly remember… oh bother! You still need to get a gift for your friend’s child’s christening. And you only have 24 hours to find, buy and pick up said gift. No problem! John Lewis’s website and app are easy to navigate, allowing you to get your gift in a few iPhone clicks – picking up a few hundred Avios points to boot. And then, a few hours earlier than promised, you receive an SMS from your friendly, conveniently-located Waitrose to invite you to pick up the item… Your Waitrose with its dry cleaning hub, its florist, its inner cellar, its sushi counter, its cafe and its wine bar……middle class manna from heaven. Not that I have actually ever used any of these services, but I really like the fact that they are there!

Let me get to the point.

Despite the headlines, JLP are doing many things right. They seem to offer a good user experience across their digital channels. Whether in their supermarkets or their department stores, they generally deliver a good in-store customer experience. It’s enabled by partners who have excellent product knowledge and a pleasant and engaging personal manner. Helped no doubt, by the fact that they have a stake in the success of their business.

Remember all those stats about how a strong CX correlates with strong sales growth rates and other financial indicators? Well, perhaps the strong CX is helping the business weather the storm better than it otherwise would. Department stores, after all, are facing an existential crisis (see, for example, Debenhams, House of Fraser, Beales and so on).

But putting to one side the fact that the category norm is hardly a positive one, the headlines are grim. Like-for-like John Lewis sales fell 2% over the festive period, while full-year operating profits will be significantly down on last year. For Waitrose, the picture is somewhat better. Like-for-like sales are edging up Y-O-Y, but there are concerns that the termination of the online supply deal with Ocado could turn the figures negative. Such are the concerns that for the first time since the 1950s, the business could scrap its much-heralded staff bonus.

The reaction to the financial results has led to the departure of three of the group’s most senior executives. This is at a time when it is seeking to implement its radical new “One Partnership” structure, in which its grocery and department store businesses will effectively be merged.

The challenges for the partnership are rather more complex than the need merely to trim the salary base. The “Never Knowingly Undersold” commitment – and whether or not to keep it – boils down to whether it is willing to allow its competitors to set its prices.

Consumers now have near-perfect information on where they can get the best deal. So when we are talking about like-for-like third party products that are available from multiple retailers, John Lewis feels it has no option but to price match if it’s to avoid losing market share. However, as it doesn’t match prices with online competitors, the promise feels increasingly irrelevant. And perhaps it does not protect its market share in the way that has been assumed. Instead, condemns it to never-ending discounts and squeezed margins.

If anything, Waitrose has performed relatively better in its market, with a pricing strategy that aligns with its premium credentials, focusing on ‘value’ and targeted promotions rather than permanent price cuts. The difference, of course, is that a relatively higher share of what Waitrose sells in the grocery market is not generic or third-party and can therefore be credibly positioned as superior to competitor options, and thus justify the premium. Herein lies another question for John Lewis: is it time to put more focus on its own ranges, as part of a broader move to reinforce its premium credentials and re-build margins?

Beyond pricing, it may also be time for a re-think on comms strategy. While the earlier Christmas adverts undoubtedly became an event and helped to separate John Lewis from competitors, many more retailers are now doing exactly the same thing. So standing out is altogether more challenging, particularly in the age of streaming and on-demand TV.

Good luck to new chairwoman Dame Sharon White – she’s going to need it. And, personally, I really hope she succeeds. Even if it means me taking the plunge and actually using rather than just admiring those lovely wine bars and sushi counters!