Marks & Spencer’s long-awaited move to add third-party clothing and home brands to its online and in-store offer has been praised by industry insiders, but they warned the retailer must capitalise on the chance to broaden its customer base.
M&S has long been fending off criticism that it should add third-party brands to its fashion offering. With the continued success of Next’s online marketplace launched in 2014 – sales via Next Label were up 21.9% for the year to January 2020 – M&S has been behind the curve in enticing shoppers.
However yesterday, chief executive Steve Rowe announced that he plans to enlist the power of complementary fashion and home labels to “turbo-charge” M&S’s ecommerce channel and freshen up the retail offering in selected larger stores.
Rowe refused to disclose details but confirmed the retailer is already in commercial negotiations with a number of brands which will be introduced over the coming weeks and months. These will be across categories where M&S dominates, possibly lingerie or denim, and also sectors where it is lacking expertise or a stronghold in the market.
M&S’s clothing sales have been on a downward trend for several years. In 2016 it suffered its biggest clothing sales fall in 10 years with a decline of 8.9% for the 13 weeks to 2 July. More recently like-for-like clothing and home sales declined 6.2% in the year to 28 March 2020, with an estimated 2.2% adverse impact from Covid-19 in the final month.
Bringing in external brands could rejuvenate M&S’s offering and open up the possibilities to recapture some market share from competitors, experts have told Drapers.
“It’s fantastic, the decision may be late but at least they’ve made it,” says Richard Fawdry, who began his career at M&S and has since held senior merchandising, trading and director roles at John Lewis, Tesco, Jack Wills and Pep&Co.
He adds that the move should help the retailer to widen its ageing customer demographic.
“The key is appealing to a number of age profiles so that you’ve got some exiting at the top and other new ones coming in at the bottom,” he says. “[Previous turnaround strategies of] doing a store refit or saying that we have changed the leg shape of our men’s trousers this year isn’t enough [to do that].”
“M&S has a lot of expertise from a technology and human perspective and if they [use this] to re-engineer their business to a digital one it gives them half a chance of turning the business around.”
M&S has proven success of introducing third-party brands to its food and beauty businesses, including skincare brand Origins and haircare products from Philip Kingsley; showing that customers trust and value its judgement and M&S understands the value of expert brand names in certain categories.
However, the search for brands that are different to and will set them apart from players such as Next and John Lewis could prove more difficult. The head of brands and concessions at one UK retailer warned that the market is heavily over-supplied.
“On paper it sounds like an effective strategy, but the reality will be down to how the new product offering sits within the current offer, brings increased footfall and sales and doesn’t cannibalise own-product sales,” he says.
He expects M&S to bring in external brands in non-clothing categories such as footwear, lingerie, swimwear and accessories, as well as men’s tailoring and women’s occasionwear brands. The success of the latter two however would hinge on the level of disruption to workwear and large events caused by Covid-19 social distancing measures.
One former M&S executive agrees that M&S needs to “bring in fresh brands to market that can’t be bought elsewhere”.
“Brands add credibility in a space that you don’t own, which is why it’s so relevant in beauty as the market is dominated by brands,” she adds. “The trick will be identifying brands that want to hang out with M&S in a shop environment that is old and unappealing. Brands want a say in how they are positioned in front of customers but let’s see if the hopeless red tape can accommodate another voice.”
She suggests M&S shouldn’t look to bring in brands to areas where it is successful, such as lingerie where it has 37.5% market share in the UK, but it could carve out a space in leisurewear.
M&S’s large store formats and large portfolio is often cited as a disadvantage as the world turns to digital. However, one expert suggests the new third-party venture may capitalise on the fact that the retailer owns a significant proportion of its stores.
“They have the luxury and ability to offer up concessions space or buy on a wholesale or joint venture basis where new brands can pay for shop fit, subsidising promotions and markdown activity,” he says.
“It’s no surprise if they go for this last strategy to deliver third-party profit from excess space given their new key hires of people who that have successfully used wholesale and concessions to deliver profit from space.”
M&S confirmed earlier this month that F&F chief executive Richard Price will join on 6 July as its new clothing and home managing director. F&F launched Arcadia concessions in several Tesco stores in 2015. Price was also formerly managing director of BHS, merchandising manager at Next and spent seven years as M&S trading director earlier in his career.
The retailer also recently hired two senior players from Topshop: Maddy Evans who has joined M&S in a senior buying role, and Helen Wilson who has joined as head of womenswear merchandising.
Several factors have contributed to M&S’s declining clothing sales over the last decade including the retailer’s inflexible internal structure and slow place to implement change. It has been criticised for a confused product offer and a lack of clear identity between its in-house brands. When product does sell well the retailer has suffered from poor foresight and range planning.
Last year M&S failed to stock enough of its new best-selling range of jeans, as worn by television presenter Holly Willoughby. Introducing third party labels will not be a panacea for all the retailer’s woes but it could attract a new customer demographic and drive traffic to both stores and online. M&S has made a vow ‘never be the same again’, and is pinning its hopes on this new strategy to regain some of its former dominance in the market.
However, with a history of failed turnaround attempts and a reputation for dawdling, the market will keep a close eye on the execution of this latest development.