Some people presume that Amazon has only to open some physical stores and it would be
unstoppable in terms of dominating shopping. They may also think that the future for other
retailers is looking distinctly bleak, but if my recent purchasing experiences are anything to by then
Amazon still has a lot to learn from a chain of U.K. department stores which started business over a
century ago. Amazon has a reputation for being very hard on its employees whereas the John
Lewis department stores are run as a partnership where the employees actually own the business.
You can hear John Spedan Lewis talking about why, in 1929, he gave his highly successful business
to all his staff. This generous ethos contrasts sharply with the mean-minded spirit that Jeff Bezos
has demonstrated at Amazon in recent years.
As November is the middle of the long build-up to Xmas it’s fitting that I should be reflecting on
how the business of shopping is being transformed. And also about the massive computing power
of the mobile phones people now carry in their pockets. The pre-Christmas period is always
crucially important for all retailers as most of them make as much as three quarters of their entire
turnover for the whole year in the last three months. And that holds true whether the business is
solely an online retailer like Amazon, or a brand that has a physical bricks and mortar presence like
the U.K. based John Lewis department store chain.
I created the PowerPoint chart above using data provided by John Lewis in their Retail Report 2015
to show how increasingly complex typical purchase journeys have become. A purchase journey is
the route taken by a shopper from the initial period of considering what to buy through to the
actual purchase and post-purchase process. In truth, even before the advent of the Internet, this
process has always been far more complicated than market research could reveal. Now, with the
help of Internet and smartphone data, we can at last begin to see the complexity involved.
As I mentioned last month: in any analysis there is a need to consider what data hasn't been
captured. In this case the missing information is how shopping takes place in the context of a John
Lewis purchase journey compared with other brands, or other offline and online stores. Online
research and shopping has added a whole new layer in any purchase journey, and smartphones
have further increased the level of convolution. It is obvious that very few purchases are made in a
straightforward and linear way, and from the chart above you can see that within different product
categories the path from consideration to purchase varies greatly. I anticipate that purchase
journeys will continue to become even more complicated as the number of Google searches made
for any retail product category has steadily increased year on year and shows no sign of levelling
off. Further evidence to support this view comes from Amazon where, for the last couple of years,
in the crucial build-up period to Xmas, the total number of searches to read reviews about various
products has vastly exceeded the number of people actually buying. It would seem that the more
choice and information we are given about a possible purchase leads us to want even more. Our
info-lust appears to know no bounds.
Interestingly, the John Lewis data gives the number of interactions (touchpoints) they have with
their customers across different product categories. As John Lewis has a strong online, as well as
an extensive offline, presence the data indicates that for large ticket items like computers or
furniture the physical shops are important, whilst for men's and women's clothes purchases more
interactions take place online. I find the most striking aspect of this data is the number of delivery
and post-sales interactions. Any student of shopping behaviour will already know about the
varying lengths of the “considering to purchase” phase for different product categories, but the
extent of the delivery and post-sale interactions will come as a surprise for many.
As Amazon pushes its prices higher, a purchase from John Lewis becomes much more competitive,
and that competition is as much about service as it is price. For several years John Lewis, as a U.K.
tax-payer, has said it could compete better with Amazon prices if Amazon also had to pay tax in the
U.K. Other U.K. retailers clearly think the same and, after much debate in the EU, changes are soon
due to be made to EU and U.K. tax regulations. The EU has already ruled against Starbucks and Fiat
for tax avoidance due to their trading via Luxembourg and the Netherlands, and it is currently
busily investigating the exact trading arrangements of Amazon and Apple.
John Lewis has always been competitive on price against other department stores in the U.K. with
the maxim “never knowingly undersold,” meaning that if, after purchasing from them, you found
the product cheaper elsewhere John Lewis would refund the difference. Part of the strength of
John Lewis is that throughout its history it has always considered the importance of the post-
purchase experience. Included in this is a generous returns policy. If a product I've purchased
develops a fault I would far rather be dealing with John Lewis than any other company. This is why,
among many other items, I've chosen to buy my last two laptop computers from John Lewis, even
though they each cost me £10 more than if I’d bought them on Amazon. My reasoning was simple -
John Lewis had the laptops in-stock, they came with a two year guarantee rather than one year, and
I know that if there is a problem John Lewis will sort it out quickly. This contrasts with Amazon's
post-sales service which borders on the illegal. For example, a mobile phone memory card I
purchased developed a fault and on contacting Amazon I was told by email that I have to return the
item to the manufacturer for a replacement. Why is this illegal? Under the U.K. Sale of Goods Act
the responsibility for a faulty product lies with the retailer to sort out, not the manufacturer. In
terms of post-customer service Amazon still has a great deal to learn from John Lewis. The Amazon
email had a pleasant enough tone but when negotiation doesn’t result in good service, no number
of fine words will cut it. To be strictly fair, on another occasion, a tub of almond butter which
hadn’t been adequately packaged and had split, was replaced promptly by Amazon, but then they
had parcelled it.
The John Lewis Partnership has clearly been investing in a digital strategy for some years. They
were one of the first retailers to bring their search engine optimisation in house instead of using an
outside agency. They obviously realised early on that the core skill of getting to the top of the
search results in Google is a labour intensive job, particularly if you want to sell thousands of
different products online. The company also understood that receiving goods bought online
presents a serious difficulty for the majority of people who go out to work. So five years ago John
Lewis began having items purchased online delivered from their warehouses to their stores, (which
include Waitrose, their grocery shops), so that customers could easily pick them up. This has since
been expanded beyond their own stores so that now, in conjunction with the German logistics
group Hermes, John Lewis has over 5,000 collection points around the U.K. As a result of this
forward thinking, in 2015 online sales make up 34% of their total sales, and over 50% of those
online sales are “click and collect.” Contrast this with Walmart, the largest American retailer, which
short-sightedly has obviously under-invested in its online service, as it currently only makes 2.5% of
its total sales online. It appears that Walmart completely failed to recognise how integrated online
and offline shopping would become, especially in the smartphone era.
Last month I discussed how people are becoming addicted to their smartphones, and how this
addiction is changing many aspects of human behaviour, none more so than shopping. At the
moment over 60% of the visitors to the John Lewis website are using a mobile phone, so making life
easier for smartphone customers has been given a priority in-store as well as online. As a
consequence stores now have free Wi-Fi throughout, and several stores have charging lockers
offering free 30 minute battery top-ups for smartphones. Naturally all the price tickets have also
been made bar code app friendly.
As you can see from the data, smartphones certainly feature heavily when women buy shoes.
Purchasing ladies shoes takes an average of six interactions with 14% of customers exceeding 10
interactions. That's not far off the amount of consideration and interaction that goes into
purchasing far more expensive items like a piece of furniture or computers. By their very nature,
women's shoes is a category where there is likely to be a high rate of returns, and this is something
at which John Lewis excels. When you receive online purchases from them, the delivery note
conveniently comes with a pre-paid Royal Mail returns label, unlike Amazon. John Lewis is
exemplary when delivering large items, too. When I recently bought a hefty television their service
included opening up the huge parcel and taking the packaging material away. For a nominal fee
they also removed my old TV set for recycling. That kind of service wouldn't have happened if I had
purchased the TV at a similar price from Amazon, nor would it have included a two year guarantee.
As shoppers become ever keener to search for a bargain, and prices are driven down virtually to
the bone, I predict that it will be the convenience of the delivery and returns, plus the reliability of
the pre and post-purchase service, that will determine how and where we choose to spend our
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