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Taking the brand online - How Pilot HitList helped John Lewis turn e-tailing from a dark art into a science

The days when you could win a place in online retailing by simply buying a dot-com name are long gone. The first generation of UK online retailers highlighted the challenges involved in making the internet channel work. Today, a combination of brand reputation, customer loyalty, order and fulfillment technology plus buying power are regarded as essential elements for any second generation e-retailer. In other words, it’s about combining the best of bricks-and-mortar with the lessons of first generation e-commerce.

John Lewis, one of the UK’s leading and most respected retailers, has developed its online operations through a strategy that has put internet analytics and the measurement of customer behaviour and satisfaction at the heart of its approach. Working with Pilot HitList, it has implemented analytical and reporting systems that allow anyone across the organisation to explore how its e-retail website is being used, what is being bought, what is working and what is not.

Making multiple channels work

Rather than describe itself as ‘going online’, John Lewis considered its e-commerce venture as part of an ongoing investment in a multi-channel strategy for its business. Run as a partnership, held in trust and committed to the satisfaction and profit of its staff, the business stayed clear of the early e-commerce gold-rush and instead looked to build an online offering when the time was right.

While the company dipped its toe in the e-commerce waters during the late 1990s, the business embarked on its investment in February 2001, when it purchased the UK arm of buy.com, one of the country’s leading internet retailers of technology, software and office products. buy.com had been launched in the UK in March 2000 and was the 4th most visited e-retail site in the UK in December 2000, with over 550,000 unique visitors. By February 2001, the company already had 80,000 customers in the UK with highly rated customer service and a powerful technology infrastructure. That infrastructure was developed with its US parent, buy.com Inc, at the time the second largest e-retailer after Amazon, with sales approaching $790m in 2000.

Overall, the Partnership has made a significant strategic start-up investment in e-commerce, purchasing both buy.com and investing in Ocado, an online grocer, that delivers Waitrose products “Initially John Lewis took a wait-and-see approach with the Internet,” said Simon Palethorpe, Managing Director John Lewis Direct, which runs the johnlewis.com retail operation. “When it was ready it decided to bring in great technology and a full team of staff from buy.com. We understood that because we only had a limited number of bricks and mortar stores, but a well-known brand, direct retailing would give us the opportunity to reach a much larger customer base.” As well as an experienced team, buy.com brought sophisticated technology, such as a fully integrated customer and order management system and a platform that would support the integration of several fulfilment partners.

Soon after the purchase, the new team began development of the johnlewis.com site. It was launched on October 8th 2001 and more than 7000 products were available online by March 2002. In under two years, johnlewis.com has grown to be one the UK’s leading transactional websites. In the six months to April 2003, the number of visitors to the site increased significantly and in the same month it was ranked the 4th most visited department store website by Hitwise.

Catering to a unique customer base

John Lewis needed to shape its offering to suit its loyal customer base while adapting to certain differences in profile. “Our studies found that John Lewis customers are far more likely to shop online than the average UK consumer.” In a survey conducted shortly after launch among visitors to johnlewis.com, 81 per cent of respondents had at least two years experience using the internet and almost a third of respondents had spent more than £500 online in the last 12 months. To date the company is finding that johnlewis.com is attracting a younger buyer profile than the core department stories. 56 per cent of people answering its online survey in January 2002 were aged between 25 and 39.

According to Palethorpe, one of the key goals was to provide outstanding customer service to the company’s core customer base. “John Lewis has always traded on value and customer service and we knew customers wouldn’t accept poor service – that meant we had to get the site right in terms of performance and usability. Our users are not forgiving.”

In particular, Palethorpe comments that John Lewis customers are keen to give feedback. “They will say when things work well but will not be shy in giving us their views when things go wrong. For us the goal has always been to help get the right products in the right place for John Lewis customers – that’s why we are embarking on a multi-channel, rather than just online, strategy.” Studies have shown that the 77 per cent of those who bought from the website found the overall buying process easy. Over 77 per cent said they were satisfied or very satisfied with johnlewis.com and 92 per cent said they found the website straightforward to use.

Putting analytics at the heart of the business

buy.com was already using the HitList platform to analyse the use of its website, including visitor numbers, visitor sources, visitor type, search techniques, and site performance. During the development of the johnlewis.com site the team enhanced this system to collect and analyse data on many aspects of the johnlewis.com site. Palethorpe’s team worked closely with Pilot’s Software’s partner, ISSEL, which supported the implementation.

“As a business, we needed to analyse our internet systems from a number of perspectives. First, we needed to monitor the performance of the site. Second we wanted to explore how it was being used – whether the way people chose to explore the store matched the way we had designed it.” One example is watching whether people use the search engine or follow the site links in the way they do in a bricks and mortar store.

He also cites outside partners, affiliates and suppliers as having massive expectations regarding analytics. “Partners are willing to try things but they need proof that they work.” He makes the point that those outside of the organisation – vendors or marketing partners for example – expect his systems to provide lots of marketing intelligence and that this is exacerbated by the very strength of the company’s brand. “At John Lewis, the challenge is perhaps even greater than for other online retailers – the high quality of our bricks and mortar brand means we are expected to know extraordinary amounts of detail about our online performance.” Palethorpe cites the need for vendor partners to know how their products are searched for – by brand or sub-brand for example. “A supplier such as Hewlett-Packard wants to know whether a customer is searching for a HP, an iPaq or a handheld computer. The answer can say a lot about buyer awareness and marketing campaign effectiveness.”

Pressure from partners, marketing and technical people are just some sources of demand. Palethorpe adds that the business may have higher expectations of the kind of analysis possible around the online business versus the bricks and mortar one. “With the Partnership determined to demonstrate we will deliver return on our investment in online initiatives, it is vital that we can measure its performance and offer senior management daily updates on the performance of johnlewis.com.”

The Pilot HitList system can be accessed by any member of staff via an intranet and records every transaction and page request. It draws data off the network rather than the server meaning that site performance is not affected. Regular reports are sent out to key departments, including finance, merchandising, marketing and IT. Users can also interact directly through the easy-to-use browser interface to make ad-hoc queries.

“Our staff can examine the popularity of particular store areas – we were, for example, able to assess the success of our Mother’s Day section. By analysing traffic we could determine what proportion of people arrive with clear ideas of what to buy mother versus those that need guidance. In other words, we can understand how much personal shopping assistance our customers want. What was clear was that most people go straight to the ‘more than £40’ shelf to seek out a Mother’s Day present.”

Palethorpe’s team has used analytics to spot where customers are lost. “A ‘search not found’ page is a major warning sign for us. We use analytics to constantly hone how the search terms are designed and products are tagged.” He stresses how much was learnt through the development of buy.com in the United States. “A year on the internet is a long time – at buy.com, we ironed out many problems before johnlewis.com came into being.”

The Pilot HitList software provides a great deal of information about usability. “It normally takes about seven different pages until someone gets to the checkout and we need to examine exactly how people use those seven pages and make sure no page puts the customer off.” His team run regular usability tests, involving users of varying expertise, often monitoring behaviour via video camera.

The measured approach is working. johnlewis.com is performing well ahead of expectations. The e-retailer’s Christmas 2002 trading reached levels beyond forecast. As a result of this success the closing date for Christmas orders was brought ahead by a few days to ensure all orders were satisfied in time.

Senior management are consequently upbeat. In his financial statement in March 2003, Chairman Sir Stuart Hampson concluded that, “Sales by johnlewis.com exceeded expectations, particularly in the build up to Christmas, Current losses are better than anticipated for this rapidly growing business.”