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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2342

The Bleak Outlook of British Retail Chains

Hemantha Abeywardena writes from London…

There have been mathematically measureable rumblings in the British retail sector for some time. With the announcement by John Lewis, the famous British retail chain, that its profit has plummeted by 99%, just to £1.2 million from £90 million in the previous year, they just went seismic this week, rattling the entire trading sector to its core.

John Lewis, one of the most favourite retail chains of the British middle classes, has been in business since 1929.

It’s renowned for its customer service, quality products and employee care. In fact, it classifies its employees as partners and has been offering them substantial bonuses in proportion to the profits made in each year – of course, in good times.

Although, the top executives of the company hierarchy are determined to turn things around, the steep fall in profit implies the fact that the challenges are huge – and complex.

The bad news from John Lewis Partnership, which also owns Waitrose supermarket chain, came a few weeks after another famous chain went into administration – the House of Fraser – which had been in business since 1849. It was renowned for its customer care and quality products too.

As far as the House of Fraser is concerned, it used to operate one of the best online clothing stores in Britain before going bust: the website was extremely user-friendly; navigation was thoroughly intuitive and the user interface was elegant; the delivery and return policies were extremely favourable too.

Despite all that the company could not survive the competition; its best efforts failed to turn around its existing business model – or come up with a substitute.

There are other chains in the same predicament. The alarming news from John Lewis could only make the concerns of these chains amplified, not diminished.

John Lewis Profit Slump: Pendulum of Uncertainty
2018
£1.2 m
2017
£90 m
2016
£84 m
2015
£90 m
2014
£128 m
2013
£118 m
2012
£110 m
Programmed by Hemantha Abeywardena

In the past, about a decade ago, when big chains issued profit warnings, analysts were quick to blame it on their reluctance to embrace online trading model; at that time, they did have a valid point to make with certain retailers.

In 2018, however, it is not the case: most of these retail chains do have very good online stores, which are clearly recognizable. They, however, could not compete with major global players to keep their market share intact.

For instance, Tesco had a profitable online arm, Tesco Direct, for few years since 2006. Then, it announced the closure of Tesco Direct in July this year, claiming that they did not know how to make it profitable in tough trading conditions, while leaving over 500 jobs at risk.

It’s clear that the management of these retail chains did their best to reverse the trend and make them profitable - before succumbing to the inevitable.

Perhaps, they misread the evolving loyalty of customers, something that the former have been taking for granted for decades.

Since millions of shoppers in Britain – and in the West - go to Amazon or eBay in order to search for products and get them as soon as possible, the British retails have been forced to fight for its corner in the face of fierce competition.

With just warehouses as their operating platforms and extensive delivery networks, the two online giants have managed to keep an unassailable lead over the traditional retail stores, which have been forced to fight with plenty of overheads on their back.

The analysts now paint a very bleak picture about the survival of the traditional stores in the face of rapidly-changing buying habits of modern customers; in this context, the steep loss of profit by John Lewis is a harbinger of doom for the entire sector – or perhaps, even beyond that.

- Asian Tribune -

The Bleak Outlook of British Retail Chains
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