Retail’s Mr Nice Guy embarks on rationalisation drive but moots £600m work pipeline
John Lewis Partnership aims to cut 30% from spending on consultants’ fees across its portfolio over the next two years, including its rapidly growing pipeline of Waitrose stores.
The £8.73bn turnover group’s head of construction, engineering and environment, Tony Jacob, said it is planning the move in response to an increasingly tough retail sector, with a key part of its strategy being to cut the number of firms used.
“We are aiming to cut 30% from spending on consultant’ fees by 2014 and, before they raise their eyes to the ceiling, it’s about improving efficiency rather than reducing fees on a like-for-like basis,” he said.
The group’s target is part of a three-pronged plan to “strip out unnecessary costs” that includes not over specifying projects and tightening up procurement.
But Jacob said the £600m spent on store development and construction over the last four years could be replicated between now and 2016. The work will include schemes to support mobile and online retail, including call centres and distribution depots. Traditional stores will also be built across the UK, with a focus on filling in gaps in the North, Scotland and Wales
Jacob said a “healthy churn” in John Lewis’ supply chain meant that work is available to firms new to the group.
Read the full interview with Tony Jacob:
John Lewis Partnership has a reputation as being one of the retail sectors’ friendlier clients but Jacob said that, in the current climate, it needed to toughen up.
He said: “First and foremost we are a business. We had a record year in 2011. That will not be repeated this year and I have had to disappoint a lot of supply chain members as a
result by telling them the work just isn’t there. We do have to make savings.”
Paul Zuccherelli, director of retail at consultant Davis Langdon, said he wasn’t surprised by the move. “It’s a reflection of what’s going on in the market at the moment. Everyone is having to cut their cloth,” he said.
Alan Park of Bristol-based CDM consultant Alan Park Associates, which has worked with John Lewis since 2005, said: “Rationalising their panel of consultants across John Lewis and Waitrose and giving a higher level of work in return for lower fees just strikes me as plain commercial sense.”
Despite making spending cuts and using fewer suppliers, John Lewis Partnership, and Waitrose in particular, are leading the retail pack. Waitrose is the fastest growing supermarket in the UK after a record 8.7% rise in sales in 2011 and an increase in property investment from £48m to £150m.
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