Marks & Spencer still has the biggest clothing market share on the UK high street and generates annual revenue of more than £10bn.
But with profits plummeting and its position as the prime clothing retailer by market value under threat, the publication of M&S’s annual results today has reminded both consumers and shareholders how far the high street stalwart has fallen.
A key aspect of the transformation plan pursued with vigour by CEO Steve Rowe is the store-closure programme. M&S announced on Tuesday that it planned to close 100 stores by 2022 and move more of its business online in part to accelerate the change in the estate department.
Retail analyst Nick Bubb says M&S is struggling with an over-capacity issue familiar to many retailers: “What was striking was how far behind it is both with stores and online. Its website is slow, it has slow page-load times – it feels three or more years behind where it should be. It feels like the Titanic sailing on and on into the iceberg
“M&S, however, is confident with its store closures [so far] because the transfer of shoppers to other M&S branches is higher than it expected it to be.”
Both stores and website need to be defined by the offer, not the other way around
Richard Hyman, retail analyst
M&S is not the only retailer seeking to slim down its estate, but retail analyst Richard Hyman believes that by focusing too heavily on the estate programme, M&S is diverting attention from the core issue: “It has been opening far too many stores for years, but the bigger point that is being missed – especially by the company – is that both stores and website need to be defined by the offer, not the other way around.”
M&S says that the estate overhaul is “vital” for its future, but it has also paid close attention to its clothing offer and price points. Earlier this month it launched its “Love it for Less” campaign that included lower prices on hundreds of lines.
However, Hyman suggests the lower prices have led to an impact on quality that has been noticed by consumers.
He adds that M&S has found itself chasing sales volume for the lower end of the market: “We are seeing fabrics that are of progressively lower quality. If you strip cost out of your product you will get a progressively inferior product and [create] the idea that M&S is too expensive – disconnected and not properly thought out.
“However low M&S goes, Primark will go lower. Primark is structured to make a margin from being the lowest-priced retailer in the market.”
M&S is indistinct from a pricing and product perspective
Martin Newman, Practicology
Martin Newman, executive chairman at ecommerce consultancy Practicology, says M&S has struggled to show that it understands the shopping habits of its core clientele and respond appropriately: “M&S is classed as being in the squeezed middle. It is indistinct from a pricing and product perspective. I don’t think consumers know what it stands for any more.
“From a strategic point of view, it has chopped and changed a lot. If you look at store closures, it was 30, then 60 and now 100. It needs to think through what business it wants to become.
“It needs to define what the business should be and deliver it with confidence. It also needs to be honest with shareholders and the City and state that it will take a couple of years to deliver.”
Figures from analyst GlobalData yesterday suggested that M&S could fall behind Primark as the largest clothing retailer.
Dave Machin, partner at management consultancy The Berkeley Partnership, says that mid-market brands are suffering: “Online spending is one of the biggest challenges currently facing retailers, and it comes not just via ecommerce – services such as Netflix and Spotify are also taking some of the money that was being spent on the high street.
“However, it seems that the mid-market is being hit hardest. The low-price-point and high-end retailers are generally reporting flat like-for-like sales.”
The product and visual merchandising is not inspirational, even online
Martin Newman, Practicology
Machin believes that to compete retailers such as M&S will need to break down barriers between stores and online, which may lead to an increase in “smart” experiential stores.
M&S admitted that its online offer was faltering, saying: “Although our online sales are growing, our online capability is behind the best of our competitors and our website is too slow.”
Newman says: “The product and visual merchandising is not inspirational, even online. It is largely a product catalogue. How can M&S leverage merchandise and make it shout and dance off the page but integrate into the core journey at the same time – not just park it in part of the site the visitor doesn’t go to?”
However, Newman believes the idea that a slow website has hit the M&S brand is a distraction: “The fact that the website’s slow isn’t the biggest issue in my opinion. There is a much more fundamental challenge to the business.
“With retailers such as John Lewis around 80% of their sales are made up of 20% of their customers. What can M&S do to ensure that they retain those relatively small number of core customers and build a more effective relationship with them than they have at the moment?”
Machin adds that creating a more seamless experience between the online offer and stores will help bring M&S into a more modern cateogry of retailer: ”If you look at what Burberry and Apple are doing, they make it easier to transact in store give customers visibiluty on stock position, telling you how to get stoick and options on how quickly you can get something, it takes the friction out of the transaction.
”Retail is not complicated it’s about having a great range and availability in the right places and options for easy ways of transacting and rigorous execution. Thaty’s very easy to say for senior managers or consultants or investors, it’s really hard to do.”
As analysts’ conflicting perceptions of the “real” problem at M&S suggest, the retailer has a lot of icebergs to navigate around as it corrects its course.