John Lewis prioritises IT investment above profit

John Lewis made significant technology investments during 2011, which contributed to profits dropping 3.8% compared to 2010, to £353.8m.

In its year-end results statement the company said: “Our priority is to serve the multi-channel customer better than anyone else - it's on that, and on innovation, that success in the future depends.”

Charlie Mayfield, chairman of John Lewis Partnership, said: “Profound changes are taking place in the retail sector and importantly this was a year when we upped the pace of innovation and investment. That came at the price of some short-term profit, but leaves us in a good place at the start of this year.”

John Lewis spent £21.3m on improving operating structures to deliver future efficiency gains, said the company.

Around £43m was invested centrally, mainly in maintaining and modernising IT platforms. Waitrose invested in a replacement technology platform for its online business, at a cost of £20m.

The company expanded its internal shared services division and investment in supply chain systems.

Christine Bardwell, analyst at IDC, said John Lewis’s multi-channel strategy had helped the company stay ahead in a tough retail market: “The retailer hasn't just sat back and waited for multi-channel to become successful. It has spent time in educating its customers on the option available to them; John Lewis partners will lead customers new to online shopping through a tutorial on an in-store kiosk, for instance. 

“John Lewis has not been afraid to innovate - the retailer will soon be bringing the online experience in-store when it launches a virtual fitting room screen, a product is has been developing with partner Cisco.”

Lisa Byfield-Green, analyst at Planet Retail, agreed: “John Lewis is investing in the future with its click & collect, e-commerce and mobile commerce operations, which are setting it apart as a leading multi-channel player. The company’s forward-looking strategy and efforts to understand its customers’ needs in 2012 and beyond will give John Lewis a competitive advantage as the market continues to develop.”

Waitrose.com orders rose 34.5% in the year. The service is now available in 152 branches, said the company. The company said its "click and collect" strategy played an important part in sales growth at John Lewis, with online trade up 24.2%, and was now fully integrated into its multi-channel operations.

Shopping via mobile phone is growing and two thirds of John Lewis shops have free Wi-Fi to enable customers to check prices as they shop, said the company.