John Henry Department Stores Case Study
Company background: John Henry (or JH to its customer base) began trading in 1881 on New Street, Birmingham. By the turn of the century it had stores in most major UK cities, selling clothing, furniture, cosmetics and household items. It now boasts 85 shops of various formats: 53 full concept stores, 30 smaller clothes-only stores and two outlets at Heathrow Airport. It has also operated a catalogue business since the 1920s and was one of the first UK department stores to get into e-Commerce. Products and services: Its full product range includes branded goods from leading suppliers (such as Alexander McQueen, Giorgio Armani and Pandora), several exclusive lines (particularly in women’s clothing), plus its own-branded goods – which are typically towards the higher end of the market. The firm’s most profitable lines tend to be in home furnishings, especially tailored services such as curtains, furniture fabrics and blinds. Its electrical business, on the other hand, has seen continued pressure from online stores offering near-identical products. Fashion has also been hit by the various waves of web-only retailers, such as ASOS. However, JH’s demographic (most of its customers are over 30) means that, for now, clothing still remains profitable. It is aware, however, that this base may also be eroded by e-tailers targeting older customers. There is also a growing difficulty in getting goods from brands, who are increasingly trying to reduce the amount of stock locked up in supply chains. Nike, Oasis and Phase Eight are among a number of firms who are only making their full range available via dropping shipping on platforms such as Anatwine. In such cases, while JH customers can order goods online via the JH website, the brands themselves dispatch the goods, reducing the margin available to JH.
IT innovation issues: Although it styles itself as a multi-channel retailer, JH management is conscious that the various arms of its business are often poorly integrated, with customer experiences being disjointed as they move across different touchpoints. Its ‘click and collect’ service is still far from frictionless, and requires considerable manual data handling behind the scenes. A ‘check and reserve’ service is still some time off, due to the lack of stock visibility across warehouses and stores. As the firm is looking to achieve a ‘seamless customer experience’ in its plans for change – where customers are recognised and supported across different channels – it knows there is much work to do. While JH has always prided itself on helpful and well-informed staff, store employees have started to complain that their job is made difficult in the current era by poor information systems. Put simply, it’s often the customers themselves, via their smart-phones, who are giving them the information about what goods should be in the system, particularly in click and collect. Some staff have asked whether they could be provided with their own hand-held devices, to put them on the front-foot in improving customer service.
Financial services and customer data: Given its long-established catalogue business, JH has had significant experience in financial services (catalogue customers traditionally pay in instalments for goods). Today, this is handled via the ‘JH Card’ – a store card that provides credit, as well as bonus points, and which can be used across channels. The card provides plenty of potential customer data, but is not fully integrated with financial systems and web stores.
U50036 Case Study 2018 John Henry Department Stores
JH values and distinctiveness: Since the 1990s JH has sought to take a lead on ethical trading, with careful attention to the provenance of its goods. This is particularly so in cosmetics, where it has long-prided itself on avoiding goods that have been tested on animals. As concerns over child labour and anti-slavery have risen in public consciousness, JH has similarly been at the forefront of offering guarantees that all its manufacturers and suppliers meet the highest standards of employee welfare. There is currently an interest in using new technology to put the firm at the leading edge of this movement, perhaps via blockchain systems.
Workforce stats: JH’s permanent workforce stands at 12,454. More than 80% of these are store staff, with the remainder working in warehousing and logistics, as well as head office operations (including buying and merchandising). In addition to a small IT management team at the New Street HQ, the firm also has a Solihull office, where the firm’s 43 IT staff are based. Solihull is also home to e-Commerce and catalogue personnel, although under different functions and reporting to different managers at New Street. Around 400 staff work in JH’s three fulfilment centres, located in Stockport, Milton Keynes and Glasgow – all of which supply store, catalogue and e-Commerce customers.
IT management and change issues: Like most traditional retailers, JH battles with integrating legacy systems and new trading platforms, particularly for web and mobile channels. Given time and cost pressures, however, a major re-platforming exercise is unlikely soon, with APIs, micro-services and steady migration to cloud computing being preferred. Taken together, this will require an influx of new IT staff into the firm. These would also include people trained in analytics and data science, able to work with marketing, merchandising and other IT staff, to analyse customer and transaction data and provide better market insight, improve customer segmentation and even introduce automated marketing. JH is also wary of being behind the retail curve in technologies such as i-beacons and in-store kiosks, as well as use of RFID tags to monitor goods in transit and store. While it knows it can’t do everything at once, and will have limited capital expenditure, it knows it needs a position on such technologies and where they should feature in its Five-Year IT Roadmap of innovation and renewal.
Financial issues and pressures: Turnover for 2016-17 was £5,808m, but with an operating profit before tax of only £353m. As a stock market quoted company, shareholders have not taken kindly to another year of meagre dividends and are looking for an action plan to turn the business around. Some institutional shareowners have suggested selling the business to a private equity firm should a robust plan not appear in time for the AGM this July – particularly if any initiative does not aim to cut operational costs, target profitable customers and make the retailer more ‘tech-savvy’ generally. Although it is working on an action plan, the board is conscious not only of the lack of skills needed for the new retail era, but also of structures and expertise for delivering change. Like many retailers, JH has tended to stagger from one year to the next, focused on hitting ‘like-for-like’ trading targets rather than corporate renewal. Put simply, it has no people or mechanisms dedicated to managing projects or programmes, apart from a few – very busy – people in IT with backgrounds in software delivery.
The New CIO and Head of Transformation: Given this range of challenges, and conscious of the importance of technology in improving customer experience and operational efficiency, the board have just appointed its first CIO, Jeff Buckley, who also has responsibilities for ‘corporate transformation’. Jeff has arrived fresh from the grocery sector, where he was CTO for Morrisons. Jeff’s immediate task is to feed ideas into JH’s action plan, focusing on business benefits from technology and structures for transformational change. In doing this, he has commissioned a number of reports and position papers from people inside and outside the business.
U50036 Case Study 2018 John Henry Department Stores
Your assignment brief
You have been asked, as an outside expert, to do a desk-based exercise to support Jeff. Drawing on your experience, as well as any research using secondary material (via the Internet, journals and news media), you should write a report of up to 2,250 words that covers the following:
a) A mapping of the benefits to JH of potential change, given new technologies and other enabling actions. This should include in-store, customer facing and back-office systems. In addition to ‘enablers’ of change, the mapping should identify relevant business changes across the retailer, as well as drivers and objectives. This will support Jeff in his effort to produce an overall assessment of the business case for IT-related initiatives, including investing in new people. b) A discussion of how project, programme and portfolio management might benefit the transformation effort at JH and what this might look like. What structures and skills might be needed, for instance, and how would these be combined with IT/IS benefits management? What risks will need to be managed as part of this change? c) An account of the leadership and change management skills that will be needed across JH, both in delivering transformation, as well as in operating the new ‘business as usual’. Your response should be provided in a business report format, supported by appropriate examples and evidence, and citing relevant literature to explain where your ideas, theories, techniques and concepts have come from. This should be submitted (via Moodle) by 12.00 noon on Wednesday 9 May. (Please consult the module guide/assignment brief in doing this exercise. Remember that JH is a fictional store, but that the above information is based on developments in the sector.)