Outlook: John Lewis credit

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The Independent Online
Outlook: John Lewis credit

"ABOUT TIME too", many will be saying. Anyone who has stood in line at a John Lewis till, only to realise that their bank account is at a temporary low point, will have cursed the group's insistence that the only alternatives to cash or cheque was debit card or opening a John Lewis account. How many sales must the stores have lost as a result?

Of itself the decision to start taking credit cards will not be enough to arrest the group's profit decline or placate the pro-demutualisation faction among partners. Opening on Sundays and Mondays like everyone else would help more, but that's not even up for discussion. But actually, taking credit cards might not help at all.

The reality of credit card economics is more complicated than it seems. For one thing, John Lewis will be paying a fee to Visa and Mastercard of around 1 per cent for all purchases made on their cards. It will therefore need to increase sales by this amount at least to make it worthwhile. If it cannot it will be making its sales at a lower margin.

There are two problems here. One is that John Lewis' sales per square foot are already high - double the level at Debenhams, for example. This means it has relatively less capacity for extra sales in its stores than its competitors.

The other issue is its slogan, "Never Knowingly Undersold". To maintain that pledge of always offering the lowest price while at the same time accepting credit cards means that it is going to have to be doubly successful at improving sales and cutting costs.

Marks & Spencer faces similar dilemmas. Now that fuddy duddy old John Lewis has joined the real world, M&S stands as the country's only major retailer not accepting credit cards. Like John Lewis, it too has relatively high sales densities. It also has 5.2 million chargecard members and successful financial services. Tamper with that and not only will financial services profits be affected, but the group's valuable database of customers will be weakened. So the decision is not quite the no-brainer it might appear. No wonder the M&S board can't make its mind up.


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