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M&S moves towards the margins

The strategy to push better and best sales is the right one for Marks & Spencer, but how easy will it be to execute?

Last week, Marks & Spencer chief executive Stuart Rose told the City that he was looking to drive a different mix in the business in the future and that he wanted to sell more better and best-priced product.

When Rose arrived at the retailer he focused on getting its value proposition right by lowering opening price points (OPP) to realign it with the rest of the market, with which it was woefully out of touch.

Last year, the retailer reduced its OPP offer as a proportion of the mix from 30% to 28%.

Rose’s ambition is to get customers to buy more at the premium end of his offer. It is a perfectly sensible strategy and a tacit admission that although M&S is selling more clothing to customers at lower prices, it is not selling enough to drive the top and bottom line in the longer term.

In 2007/08 M&S’s share of the total clothing and footwear market fell 0.1% to 11%. Its volume share increased from 10.7% to 11.2%, according to figures from research firm TNS. The only M&S categories to pick up value share in the same period were men’s and kids’ wear.

Rose says he is not looking for a radical shift in the proportion of the mix of clothing at OPP and maintains that he will defend the retailer’s value credentials. However, he is keen to drive the better level of the ranges and grow and broaden the offer within these better ranges.

Currently, 53% of the offer is better and 19% best. “Our price architecture is probably the widest of any store on the UK high street,” says Rose. “I will be happy at 28% OPP; but if it falls further by 2% more than that it will not be a big deal.

“The Autograph business at the best level of our market has made really good progress over the past 12 months and we think we can grow sales of that to £600 million in the next three years.”

Rose told the City that to get there M&S would have to be more rigorous across its buying and merchandising operations and would need to have done its utmost to ensure that product ranges are easily understood and shopped by its customers. He added that the business also needed to get the balance of its offer right between co-ordinated product and single-item shopping.

Tempted to trade up
Maureen Hinton, analyst at retail consultant Verdict Research agrees with Rose that driving sales via better and best is the right strategy but she says that achieving that will be about better differentiation in price and product as well as better shopability.

She says: “Every year we interview 6,000 consumers on how they spend their money and we have just finished doing the research on clothing. M&S has increased the number of shoppers buying clothing there and specifically the number of people that make M&S their main provider of clothing, but the value of what they are selling to those people is not going up because they are buying more at the opening price point level.

“To get people to trade up they have to be given a very good reason. It has to be clear not just in the quality of the product but in the store that the product is special. Autograph is a really strong brand name but the way it is presented in store is still not clear enough. M&S has to make it really easy for people to trade up. The problem remains that there is tons of great product in M&S, but because by its very nature it has to be everything to everybody it is still very hard work to shop it.”

Hinton believes there is much more work to be done on the way that the sub-brands Autograph, Limited Collection and Per Una are differentiated.

M&S is already working to clarify the product mix within Autograph. Last year it introduced Autograph Weekend for the sub-brand’s smart-casual offer and in August it will introduce a capsule workwear range called Autograph Essentials into 120 stores.

Helen Low, head of womenswear design at M&S, says: “The idea behind Autograph Essentials is that we have done the editing for the customer. It should be the place for the woman who wants a pair of black trousers, a smart black skirt for work or a little black dress for a do. She wants to know it will be stylish and the best quality.”

Essentials follows on from the launch of the limited Autograph Exclusives line last season in 12 stores and online, which further stretched Autograph’s price architecture.

M&S’s executive director of clothing Kate Bostock is keen to increase these niche areas and special exclusives within the retailer’s brands. She believes not only will they drive better margins but they will also make M&S more of a destination store.

She told Drapers: “I spend a lot of time talking to customers and from that I know they are happy to buy into premium-priced product as long as they know they are not going to see the same thing in 200-odd stores. For example, what I will be looking to do more of at the best end of the architecture is to take a particular dress and do it in four different prints but only put it through a quarter of the chain.

“I might also take the same dress, manufacture it in a beautiful fabric, add some embellishment if it is appropriate, and sell it in just three stores. M&S has the brand stretch to sell a dress of that quality as long as there is the level of exclusivity required to go with the product.”

In menswear Bostock says she is working with head of menswear Julian Kilmartin on ensuring that the sub-brands in the menswear offer are better aligned with the rest of the business. She adds: “People understand the positioning of Autograph across women’s, kids’ and home. I’m not sure it is as clear in menswear. I think there is an opportunity for the better price level, and when you consider that 50% of our menswear is bought by women it makes sense that they understand the men’s proposition.”

Bostock’s remarks about menswear have prompted speculation in the market that the retailer will launch Autograph Weekend and even possibly Limited Collection in menswear. One retailer says: “It would make sense to brand their smarter, better-quality casualwear within the Autograph Weekend brand name. I think to try Limited Collection is more risky. M&S’s forays into the under-35s market in menswear have all failed. SP didn’t work and neither did Blue Harbour Vintage.”

Another menswear executive says casual menswear is causing problems for M&S. “They are losing market share on things like denim in particular. Often when you go into a store almost 80% of the denim is at OPP. The problem is that they launched Blue Harbour and it did a good job for them, but they have driven down the price and quality too much and now it has no cache with the customer. They should stick with the brands they have but build the quality back up and differentiate on the price accordingly,” he says.

What M&S will do with its menswear sub-brands remains to be seen, but Bostock is clear that M&S’s own brands put it in a good position to exploit the better best part of the entire clothing and footwear business, and differentiate it from the competition. She says: “I want M&S to be proud of doing something slightly different to the rest of the high street. It does get pretty boring when you walk up and down the high street and see everyone with the same stuff.”

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