When John Lewis surprised the market in February 2001 by
buying the UK
operations of the technology shopping site buy.com, it seemed
to mark a
sudden change of direction for the retailer. Until then,
John Lewis had
largely ignored the internet frenzy that had swept through
the stock
markets
and the retail sector.
The company's partnership structure - John Lewis is owned
by its staff -
protected it from the shareholder pressure to deal with
the perceived
threat
from e-commerce that in the previous few years had galvanised
other UK
high
street names - from Boots to Tesco and Dixons - to make
noises about
their
internet strategies. John Lewis had a small internet operation
on trial
before the acquisition, but had spent little effort on its
development.
So
the payout of more than ?2.9m for buy.com from such a conservative
organisation took everyone by surprise.
Initially, that change of direction seemed to prove too
much for the
venerable retailer to cope with, since for most of the next
year, the
company seemed to struggle to "digest" the purchase.
There was little to
show in the way of a new internet strategy, as buy.com operated
alongside
the limited offerings available on the John Lewis Now web
site.
Then, last October, the company finally took the wraps
off a revamped
site,
johnlewis.com, using buy.com's technology.
Finally, following a successful Christmas for the main
site, the buy.com
site was folded into johnlewis.com.
Since then, the site has become the sixth most-visited
internet retail
site
in the UK, according to the February 2002 figures from Jupiter
MMXI. The
site runs alongside a paper catalogue business, sharing
the same call
centres, order and fulfilment systems, under the banner
of John Lewis
Direct.
Simon Palethorpe, managing director of John Lewis Direct,
sees the
number
six ranking, giving the site 379,000 visitors a month, or
2.3 per cent
of
the UK online shopping market, as a vindication of the company's
patient
strategy.
Right time
"John Lewis had very much a wait-and-see approach
in the early days,
standing apart from all the hype in the internet sector
until it could
see a
clear strategic direction," he explains.
The company plans to invest more than ?30m in the website
over the next
four
years. At first, the site will focus on home products and
gifts, with
more
than 5,000 different lines available.
Buy.com's technology, which runs the site's entire e-commerce
operation, has
proved good enough to manage the sorts of volumes he hopes
to achieve,
says
Mr Palethorpe.
"The most important aspect for us is that we are trying
to replicate on
the
internet the sort of customer service for which John Lewis
is renowned
in
its branches. That means our IT infrastructure has to be
as robust as
possible, the fulfilment infrastructure has to be as robust
as
possible, and
we had to test, test, test before the launch."
The company also placed great emphasis on training the
staff in its call
centres, which are outsourced to ClientLogic in Exeter.
"It made sense
for
us to buy the technology in [from buy.com] because they
had developed
it for
over four years, and it worked, so we didn't have to start
from
scratch," he
adds.
By waiting until the internet frenzy had cooled and the
market crashed,
the
company also managed to pick up the system relatively cheaply.
As well as the buy.com system, Mr Palethorpe points to
two other
essential
pieces of technology that have been bought in. The first
is search, an
area
in which buy.com's technology was found to be lacking.
"Search was one of the most used features on the site,
so we had to get
it
right," he says. The company now uses an engine from
Macado.
The second is a site analysis tool, from Accrue Software
[now Pilot Software].
This monitors the usage of the site, giving John Lewis reports
on which parts of the site are most popular, which parts
might need updating, and how users tend to behave. "It
lets you really understand what's happening on the site,
so you can make better decisions about changing it, or how
it ought to work," he explains.
The rest of the system, through which every part of the
e-commerce
operation
from ordering, fulfilment, payment and accounting are automated,
has
been
developed from the buy.com technology and other in-house
work.
One important lesson the company learned was in marketing,
Mr Palethorpe
adds. Mass broadcast media such as television were simply
not suited to
the
task, he believes, as they were not sufficiently selective.
Instead, he favours a more targeted marketing approach,
using print,
web and
direct marketing that matches more closely the consumer
profile of the
customers the site is trying to attract.
Mr Palethorpe aims to bring the site to profitability in
2004. If he is successful, it will be a triumph for the
notion of last mover advantage.
