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  November 25th, 2016 | Written by

Bricks and Clicks

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  • There's a 4:1 cost difference between serving customers online and wholesale replenishment to department stores.
  • The challenge retailers going on line is how to accommodate growth and remain profitable.
  • John Lewis DC is managed to provide one pool of stock for all channels.

John Lewis, the UK retail chain, like many traditional retailers, is making the transition to online sales. It has achieved exponential online growth in the last 12 years, to the point where online represents 45 percent of the business

So why does John Munnelly, head of operations at John Lewis’ Magna Park distribution center in Milton Keynes, describe that growth as his biggest challenge?

“The cost difference between serving customers online and wholesale replenishment to department stores is probably a factor of three or four times to one,” said Munnelly, in a recent podcast. “The challenge is how do we accommodate that growth and remain profitable.”

John Lewis is very much committed to its bricks-and-clicks approach. “We no longer can distinguish where the sales are coming from,” said Munnelly. “So it’s difficult to determine whether the benefits of the [store] far outweigh the online or vice versa. We know that the omnichannel shopper is much more lucrative than pure-play.”

Munnelly manages the Magna Park campus to achieve one pool of stock serving all channels. “We no longer have to accommodate a larger stock holding to accommodate the availability of both channels,” he said, “Customers and department stores are served on a first-come-first-serve basis.”

On the other hand, John Lewis does not fulfill onlines ales from stores, as many other retailers do. “There is lots of debate in the business about that,” said Munelly. “And my personal view is that it is more of a fashionable trend.”

Why don’t they do it?

“I’ll give you an example,” said Munnelly, “A customer takes the time to jump in their car to arrive at the department store, browses and shops at their leisure, only to find out that the product they were just about to put their hands on has been taken by somebody taking and picking it up for a home delivery order. Lots of debate in the business but we don’t feel we are in a place where that is an imperative at the moment.”