John Lewis is used to doing things its own way. The company is run as a partnership, with the company’s 70,000 staff all taking a share of profits in the form of annual bonuses (15% of salary last year, a total bonus pool of £151.3m). Presumably, John Lewis will be hoping plenty of staff will choose to invest in the scheme, along with the 1.5m John Lewis cardholders who will be eligible.
Mayfield says he’s confident the idea’s going to work. And why not? To begin with, the idea of finding non-bank sources of finance is more on-trend than xxx. And that 6.5% rate should be very attractive to retail savers, given that the average ISA currently pays out somewhere between 2.5 and 3%.
The other advantage John Lewis has is that in terms of reputation, it couldn't be further removed from the banks and the controversy over bonuses and tax-dodging. OK, so your average saver might find it a bit odd to put money into a retail bond rather than a bank savings account. But perhaps they'll prefer to invest in a brand they trust. And besides, these bonds are getting more common: Tesco launched its own retail savings bond in 2006, while entrepreneur Will King from King of Shaves came up with a similar idea last year.
The only real criticism of the John Lewis scheme has been from those who point out that almost a third of the payout comes in the form of vouchers – not exactly ideal to the average investor. And if you subtract that portion, the rate of return is only very slightly higher than inflation, which currently stands at 4%.
But Mayfield would argue that this is not a bond for your average City investor. Other than its own staff, it's only targeting cardholders, i.e. its regular customers. And given how much money most of them spend in their local John Lewis anyway, a couple of hundred pounds worth of vouchers plus an inflation-busting savings product (with a cast-iron return) probably sounds like a pretty good deal...