The John Lewis question

Workers at John Lewis have just received big bonuses after a successful year. Which raises the question: why has John Lewis done so well at a time when stock market listed retailers have been struggling?
It could, of course, be just luck.
But could there be something else? Might it be that John Lewis's partnership model makes it a better retailer? Maybe the financial incentives and atmospheric benefits it confers upon shopfloor staff help make John Lewis more attractive to customers than other retailers.
Or turn the question around. What benefit is there for a retailer in having lots of small dispersed outside shareholders? Why is this ownership model better than concentrated private ownership which can discipline management better, or worker-ownership where workers are better motivated? The question is not, of course, confined to retailing.
If you think only loony lefties like me ask this, you're wrong. The market is asking it too. In my day job, I've pointed out that the market is pricing retail stocks at just one penny for every pound of non-food sales - which suggests markets have grave doubts about the merits of listing for retailers.

Comments

[Neil]

I suspect the next few comments will be along the lines of "laa laa laa I can't hear you".

In my experience, every business I've seen floated (or sold to a company that is) has turned sour for pretty much everyone who works there.

Basically, the old priority of 'doing what we do as well as we can and making some money' gets replaced by, well, no-one quite knows. It turns into them-vs-us overnight, and anyone any good starts looking for new job.

[cjcjc]

Service at John Lewis is OK-ish - though nothing is ever in stock.

Waitrose of course is excellent, except in the central London stores where they struggle to get good staff.

[Adrian]

Respectfully, aren't there two propositions here?

1) JLP has a superior market position/business model.

2) JLP is employee-owned.

Are these correlated? Well, they might be. Or they might not.

[ad]

Employee-owned companies have been around for a long time. If they are superior to PLCs, why did the PLCs spread, but not employee ownership?

[Scott Hughes]

Employee-owned companies are better for the employees. Share-holder owned companies are better for non-working share-holders who want to leech off the worker's labor. Money controls enough to make sure they get what they want in this society. For example, if an employee-owned company does well enough, the money-holders in society will buy it out. The people in charge of the company will usually sell out. And workers are so desperate to work that they need to accept whatever deal they can get from those who own everything.

[Jim]

And that is why we have laws.

[james c]

You have made a few mistakes here.

1 You seem to be comparing the quoted retail sector with total retail spending for the whole economy.

2 Free cash-flow will be considerably lower than earnings because working capital will absorb cash.

3 The comparison with the PV of sales is meaningless.

4 Quoted retailers generally have debt and leasehold liabilities.

[Jay, writer Memberspeed.com]

I'm not really sure how to approach any of the questions but I do have strong beliefs regarding the influence of the workers themselves. Based on experience, I believe that a happy salespersons attract more customers. There is something about your employees' countenance that draws positive energy and opportunities in.

[chris]

James C - I don't think these are mistakes. The point of the comparison between the quoted retail sector and the PV of retail sales is precisely to show that the market expects only a tiny fraction of sales to translate into revenues for shareholders. What's meaningless about this?
Yes, retailers have debt liabilities. But this fact - and the implication that some retail revenues will flow to bond-holders rather than shareholders - is embodied in share prices already.
I'll concede point 2. But this merely strengthens the point that shareholders will see only a small amount of revenues from retail sales.