Waitrose sacrifices profits for better customer data

Waitrose has revealed lower profits in the first half of the year due to investment in its online channel Waitrose.com and its loyalty card programme, myWaitrose.

However, it said that the investment was starting to pay off, with loyalty card holders encouraged to shop more frequently with the food retailer. The scheme is also giving Waitrose valuable customer data it did not previously have. Rival Sainsbury’s has previously highlighted the great value of its loyalty programme, Nectar.

“We saw continued strong take-up of the myWaitrose card and the associated offers and the number of myWaitrose customers now stands at 4.8 million,” parent company John Lewis Partnership said in its interim results for the half year ended 26 July 2014.

“As well as driving incremental sales, myWaitrose is transforming our understanding of customers and allows us to target and personalise our marketing communications.”

Click & Collect expansion

John Lewis Partnership said that Waitrose.com was an area of “significant investment”. For example, it launched a new ‘Cellar wine’ website in May and will shortly launch Click & Collect for these Cellar wine orders.

Click and collect is becoming an increasingly popular way for retailers to combine their bricks and mortar and online channels to provide a seamless ‘omni-channel’ experience.

Waitrose said it is increasing the number of branches offering the Click & Collect service for Waitrose grocery orders, but also for John Lewis orders, where Click & Collect makes up over half of online orders.

These will be “supported by new processes that will make the service more efficient and faster”, the company said.

Waitrose.com added 46,000 new customers in the first half of the year. It reported online grocery gross sales increased 54 percent in the period to £161 million, making up 4.6 percent of its total gross sales across Waitrose, which grew 5.1 percent to £3.15 billion.

John Lewis

Online represents a far greater proportion of department store John Lewis’ sales. The business reported a 25.6 percent increase in online sales to £552 million, with online representing over 30 percent of sales. These results come a year after the company launched its johnlewis.com website on a new, Oracle ATG web platform.

In comparison, shop sales increased by just 3.6 percent. Profits at the department store rose by 62 percent to £22 million.

Sir Charlie Mayfield, chairman of John Lewis Partnership, said: “Our sales growth was driven by more customers shopping with Waitrose and John Lewis, with customer numbers up by over six percent and four percent, respectively.

“This reflects the growing appeal of our omni-channel offer across both brands, including the success of Click & Collect, which now accounts for more than half of John Lewis orders placed online, and the popularity of the myWaitrose and my John Lewis programmes, which are encouraging customers to shop more frequently with us across all of our channels.”

Mayfield also acknowledged the role of new IT systems in helping the John Lewis Partnership to control its costs and increase profits.

The company almost doubled its total capital investment in systems and the supply chain compared with last year, he said. Investment in Waitrose was up 120.6 percent on the previous year to £220.2 million, and in John Lewis was £91.3 million, up 68.5 percent.

“Our first half performance has been hard won. I want to acknowledge the tremendous efforts of all Partners [the company’s name for staff], our co-owners, in achieving these results through a period of significant change, including implementing new IT systems and adopting new ways of working,” Mayfield said.

Copyright © 2014 IDG Communications, Inc.

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