How John Lewis keeps making so much money

John Lewis had its best ever Christmas in 2012. In fact it had its best ever week too – with sales smashing through £150 million for the first time.

Over the week before Christmas takings at its 39 stores and website hit £157.8 million, a 26.5% increase on the same week in 2011.

Yet all around it other established chains are collapsing or issuing profit warnings. The past few months alone have seen Comet, Jessops, HMV and Blockbuster all go into administration.

“By any standards, this is an impressive performance, but when the general trading environment over Christmas is taken into account it underlines the fact that John Lewis is outperforming the market by a very significant degree,” Neil Saunders, managing director of retail consultancy Conlumino, told Reuters.

Value, not price

In an environment of austerity and frugality it’s no surprise that discount chains such as Aldi and Lidl and pound shops have flourished: These shops save people money. But a high-end retailer doing so well is arguably more surprising.

But despite 2012 still seeing a struggling economy and job losses, there were a few external factors that helped boost sales at John Lewis.

These included the feel good factor of the Diamond Jubilee, and the fact that the VAT increase depressed sales in 2011. The Olympics and Paralympics undoubtedly helped boost sales - John Lewis was a sponsor the games and sold official merchandise.

The demise of Comet just before Christmas and the row over Amazon’s UK tax arrangements were also touted as providing a boost to the  company at the end of 2012.

A Comet store on the final day of trading Image: REUTERS/Neil Hall

Another factor is that, despite being known as a quality brand, both John Lewis and its supermarket division Waitrose have long stressed the affordability of their products.

John Lewis’ “Never Knowingly Undersold” slogan is one of the best known in the business, promising to match the prices offered by rivals. At the same time the department store’s supermarket division - Waitrose - has a “brand price match” scheme that promises to beat rival supermarkets.

The shop – which is a partnership owned by its staff rather than a company owned by shareholders and run for profit – has another advantage. People trust it.

It ranked seventh on a poll of the UK’s favourite brands compiled by YouGov last summer. Meanwhile a survey by price comparison site uSwitch showed that 75% of Brits would trust John Lewis if it were a bank.

These figures are backed up by users’ experiences.

“The reason John Lewis do well is because they have some idea of customer service, mostly the staff have pride in the store. I can't think of a single other store (chain) that comes anywhere near,” wrote Yahoo! user Anthony on story looking at how shops did over Christmas.

“Quite simply really..... JL has good pricing, good guarantees and excellent customer service,” added Yahoo! user CHOCOL8.

Other readers pointed out that John Lewis will replace or refund faulty goods without quibbling and that staff were treated well and therefore happy to offer decent customer service.