Elasticity of demand at John Lewis 2019

John Lewis has had an awful 2019. In the 35 weeks to the end of September, sales were 3% down in

money terms compared with 2018. Factor in 2% inflation and the real decline in sales was close to

5%. The situation was even worse in the store's 'Home' division, which sells furniture, curtains, beds

and kitchen equipment. Here, cash sales were down by 5%, implying 7% in real terms.

To tackle its problems, in the first week of October a special event offered 20% off the prices of

everything in the Home department. The results were spectacular. Furniture sales rose by 71.3% by

volume, while volume 'cooking & dining' sales rose 46.6%. Across the whole Home department,

sales were up by 68.4%.

Other departments also benefited, such as clothing sales which rose by 8.8% that week, whereas

they had been flat for the previous 35 weeks. Sales across the whole John Lewis/Waitrose business

rose by more than 30 million as a result of the promotion.

Source: John Lewis website 18/10/19 (the previous week's sales are made public at 10.30 AM)

QUESTION ITSELF

Consider possible reasons why the price elasticity of demand for furniture items is different from

the PED of cooking and dining. (7 MARKS)