PowerPoint Presentation

John LewisReinventing RetailJohn MunnellyHead of Operations

Good afternoon and a huge thanks to the LogiPharma team for asking me here today, to this amazing venue, to share the John Lewis Story with you as part of the Out of Industry session.

The transformation we have experienced over the last 10 years really has been a great example of a business that has had to Reinvent itself to remain competitive in the marketplace

And in that time weve seen the business transform from being a purely bricks and mortar based department store business, as it had successfully been for 140 years, through the world of multi channel and now seen as one of the leading OCF retailers in UK.

However, like all retailers, we face the same challenge in not being able to PREDICT, with any degree of accuracy, how the next chapter in this epic digitalisation story is going to unfold. But more of that later.1

Magna Park Campus

Ive had the pleasure of leading the development of the Magna Park Campus, JLs automated NDC, since it was first conceived almost 10 years ago, and it would be fair to say that there has never been a dull moment

Prior to that I managed to survive 4 very interesting years with J Sainsburys when they initially introduced automation within their network, what an interesting time that was!!

And before that I enjoyed about 4 years with Littlewoods/Shop Direct where I was responsible for their large fulfilment centre in Manchester, including the implementation of their automated solution

So you could say that Ive had the fortunate experience of seeing Automation in many guises, The Good, The Bad, and the Damned UGLY!

2

3Industry Awards

Warehouse Operations

Omni-channel Fulfilment

Large Operations

Warehouse InitiativeplusRetail & E-Tail

And we are immensely proud of the industry recognition we have received from the industry over the last couple of years for the facilities design, and I would like to share a couple of them aspects with you as we go through this session3

Content

Future Challenges

The Journey

Key Ingredients

1, A brief look at the company history and what the JL Partnership is all about2, Our Journey over the last 10 years and how the business has transformed during that time, including key highlights and lowlights3, And finally my views on what I see as the Future Challenges

4

10 stores in10 years 2005

Our Supply Chain Strategy back then was 10 in 10

We only had 26 stores back then and our sole ambition to open an additional 10 department stores in 10 years, with only a sprinkling of eCommerce5

LOOK MOM, IM ON THE INTERNET!A sprinkling of Ecommerce

The game changer was the internet. Our first smart move was buying buy.com in 2001Recognising the need to buy in expertise and infrastructure as we didnt have that internally3pl relationship, website, etc..6

No bigger than an average sized Store!

You see, we had purchased the UK arm of Buy.com in 2001, really smart move from our current Chairman, Charlie Mayfield, but even in 2005 it was still deemed an experiment!

And most people suggested it would never grow any bigger than an average sized department store7

Online growth - Forecast 67

113

40

21

2017300m2002200320042005200620072008200920102011201220132014 million2015

This was our original forecast for growth of ecommerce Now heading up our H&S dept!

8

9Distribution 2005

No, thats not fare. We were much more advanced than the picture would suggest

However, like many businesses back then, the distribution side of the business was deemed a necessary evil, rather than an asset that could assist with the customer proposition

9

Store Unfriendly

Packs not Singles

Early finish Friday!Manual

Overstocked

Wrong placeLimitations5-Day Week

Speak to the pictures

10

The Plan

Store FriendlyCapacityEfficiency

So that was the Plan.10 more shops in 10 years with a dash of Ecommerce!!

But lets have a look at what actually happened

11

The Reality

The Reality

So that was the Plan.10 more shops in 10 years with a dash of Ecommerce!!

But lets have a look at what actually happened

12

Shop Formats

At the same time you have proliferation of shop formats in addition to a much more aggressive roll out of FLDSsJL At HomeClick and CommuteConcessions with Shinsegui - KoreaAdding complexity from every angle

13

Online expansion

High volume low margin

Introduction of Fashion

On line journey then turned into Omni channelIn JL that means fashion 3pl support back into splitting stock holding technology and home products low margin

14

1,640

Online growth - Actual 67

113

186

268

333

394

540

681

959

1,142

1,415

40

21

2017300m2002200320042005200620072008200920102011201220132014 million2015

10 years on and we have a completely different business!!

This was our original forecast for growth of ecommerce Now heading up our H&S dept!

And this is what actually happened

Now that level of seismic shift in the customers shopping behaviour resulted in the need to continually keep asking the business for additional funds and this is what it felt like!! A real tactical approach to enable us to survive

15

We need more cash!

And the impact of those 2 dynamics in the earlier days caused a need to request funds to get through peak each year!

16

2012

Revised Strategy

17

Revised StrategyEmpowered Partners driving operational excellenceFulfilment beyond customers expectationsAn agile supply chain that exploits scale to drive efficiencyBeing Agile

The right amount of stock in the right place at the right time

Working smartlyFulfilling customersEmpowering Partners

Not just about logistics

18

2016

Achievements to date

19

Achievements

Click and Collect

Sell One Pick One

Single Pool of Stock

20

Out with the old

21

in with the new

22

What were the Magic ingredients?

There have been 3 main call outs when it comes to the key ingredients

Building scale and capacityDesign principlesPartner Model

23

Lots of luck

And if all that fails, just remember to say your prayers at night24

25

Build Scale and Capacity

It would be fair to say that we really didnt have a clue how the business was going to grow, Branch or On-Line?

Therefore, we built the shed bigger than required

25

Design Principles

Automated Vs Manual

Multi Functional

Modular

So, the question we are regularly asked is HOW? How have we managed to navigate our way through the seismic shift that we have witnessed in our customers shopping behaviours, seeing the strategy move

from 10 in 10 to 50 in 3

Well, there have been many challenges we have had to overcome but the 3 main call outs would be

1, Flexibility is expensive but fundamental2, 20 Month Peak Development Plan3, Our People - The glue that holds it all together26

Modular20112012

20132015

2014

2016

The Modular Design sounds so easy when you say it like that but it really is a complex challenge and we have it every single year!! And weve become quite good at it!!

It's starts about 20 months before the peak we require the capability, if that makes sense and I would like to take you through this process so you can appreciate the complexity that it adds

27

Additional Capacity

And we had no sooner landed back in January and the installation teams were back on site disrupting the day job again. Constant change28

Additional Capacity

And we had no sooner landed back in January and the installation teams were back on site disrupting the day job again. Constant change29

Hanging Garments

2016 also sees us go-live with our new automated HG solution, c 1m sq ft solution that we see the site consolidate all of JLs small items with hanging fashion.30

Hanging garments

2016 also sees us go-live with our new automated HG solution, c 1m sq ft solution that we see the site consolidate all of JLs small items with hanging fashion.

31

Partner Model

32

Great People!

Constant Change/Customer Engagement

The team have been almost immune to the constant changes we have gone through on an annual basisWe try to Live and Breath the principles of Co-Ownership - Fantastic Chemistry! One of our biggest challenges is replicating the Customer Centric approach in ShopsNot Customer Facing like a Shop- Partner Last Touch

The Same Team - Emotional Engagement

One of the most important Success Factors Same Team throughout all elements of the Project through to present day

Created the Business CaseDeveloped the Project PlanChose the DeveloperChose the IntegratorDesigned the functionalityTested the equipment and systemsImplemented the solutionLived through all the challenges throw at usAnd now operate the site on a day to day basis..Unrivalled level of emotional engagement

Business Confidence

And over the last 5 years the Team have given the business confidence to help them make the decision to continue the Journey with the introduction of Magna Park 2..33

Magna Park Campus

The Campus stands at 1.4m sq ft footprint2.1m sq ft operating space when taking into consideration the 6 levels of HG solution which goes live 2016220k SKUs Single Pool of StockIntroduction of Auto Pallet Highbay and hanging Garment solutionConsolidation of Flat and hanging orders for both customers and shopsImmensely Proud of what we have delivered to date!!Aspiring to be Truly World Class

34

Future Challenges

Predictability

Profitability

Partner Ability

I CANT FINISH WITHOUT A BIT OF JEOPARDY!

35

JL Magic

This is where the real JL Magic has happened in the past, the customer facing experience is second to none and there is nothing we wouldnt do for our customers, however, due to the growth of our on-line business, the traditional shop-floor Partner role is no longer enough on its own

36

From back of house to the Front Line!Drivers

Contact Centres

Distribution

Partners

37This is challenging our traditional Partner roles. Roles which were previously back of house, like drivers and contact centre callers, and are now our front line of customer service. Our business is changing and the jobs Partners do also needs to change.

Once upon a time

Pick

Convenience

Consumables

Pack

Fulfilment Centre

DeliverNowCost x 3

Wasnt the retail world simple when it used to look like this!?!

No longer can we depend on the customer to do all the picking, packing and transport home!

The rules of the game have changed and the consumer driven market we now compete in is hugely more expensive than ever before

38

Online as % of trade29%

26%

21%

17%

14%

12%

10%

33%

38%07/0808/0909/1010/1111/1212/1313/1414/1515/16Profitability201720182019

50%

?

?

We believe that its 3 times more expensive to fulfil an order on line Vs sending stock to shopsOur business is changing. Online makes up almost 40% of John Lewiss sales and this is look to increase further. 50% by 2019, could be sooner!!

39

Predictability

Events

Christmas

Black Friday

Who Knows!

This is challenging our traditional Partner roles. Roles which were previously back of house, like drivers and contact centre callers, and are now our front line of customer service. Our business is changing and the jobs Partners do also needs to change.

40

The 4th Industrial Revolution?

Internet of Things

Drones

Cognitive Computing

3D Printing

Virtual Reality

WearablesThe next wave of disrupters in retail

For sure, we are at the start of the 4th Industrial Revolution The digital revolutionAnd with this lot on its way, how the hell do you predict the future???Im sure theres one missing entitled Accurate Forecasts.If any of these crackpot ideas takes off they really will be the next wave of disrupters in Retail - And it will also mean fewer jobs!

41

Key Insights

CapabilityBack End Vs Front End

DependabilityWhat matters doesnt change

FlexibilityExpensive but fundamental

To summarise

The world of digitalisation really is changing to a landscape of retail beyond recognition, certainly beyond anything we expected when we set out on our journey 10 years ago and I think we could all be accused of misjudging the sheer pace that Digital was going to advance.

However, I actually think we are still at the start of the journey and we know that there are a number of other crazy ideas sat looming in the background waiting to disrupt the world of retail even further and when those challenges do arrive they will test us in a number of different ways whether thats our people and the roles they have played in the past versus the of roles we are now asking them to play or whether thats continued pressure from the customer demanding more for less which will put even further pressure on the productivity debate and a will most definitely bring to the forefront that likes of mechanisation automation and dare I say it full blown advanced robotics.

So as we embark on the next stage of this epic journey, Reinventing the World of Retail, I think its hugely important that businesses dont lose their identity or the values that have got them to where they are today.

At John Lewis we have successfully traded for over 150 years and we have built of business on the foundations of Value, Assortment, Service, and Trust, and I hope this last clip illustrates why at JL we strongly believe that whatever the challenges that lie ahead, Whats Important Shouldn't Change42

John LewisReinventing RetailThank You

Good afternoon and a huge thanks to the LogiPharma team for asking me here today, to this amazing venue, to share the John Lewis Story with you as part of the Out of Industry session.

The transformation we have experienced over the last 10 years really has been a great example of a business that has had to Reinvent itself to remain competitive in the marketplace

And in that time weve seen the business transform from being a purely bricks and mortar based department store business, as it had successfully been for 140 years, through the world of multi channel and now seen as one of the leading OCF retailers in UK.

However, like all retailers, we face the same challenge in not being able to PREDICT, with any degree of accuracy, how the next chapter in this epic digitalisation story is going to unfold. But more of that later.43