M&S to Close 100 Stores: How an Established Retailer was Overtaken by a Start-up
In 1998/9, Marks & Spencer (M&S) announced record pre-tax profits of £1.2bn. Following this, the company announced plans for the biggest M&S store in the world - 200,000 square ft of selling space in the centre of Manchester - to open in 2000. Along with this:
- The Chairman announced the purchase from Littlewoods of 19 stores in high street locations, adding a further 600,000 sq. ft to the M&S estate
- Five further stores were planned to open in Germany
- In a postscript, the company announced it would ‘pilot’ a clothing catalogue to provide a more valuable service for busy people
A few months later, in June 2000, ASOS launched.
Today (May 2018) the market capitalisation of M&S (a British institution) stands at £5.03bn, with ASOS at £5.5bn. M&S have recently revealed they will be closing 100-plus stores by 2022.
How can this decline be possible? How can an established retail institution be overtaken by a ‘start-up?’
Here are the reasons which I believe have led to this remarkable turnaround:
- M&S’s management’s myopic belief (until now, perhaps) is that the M&S brand is ‘bigger’, more sustainable and more endurable, regardless of the UK consumer’s shopping behaviour
- Failing to recognise the UK consumer’s world-leading ‘early adopter’ characteristics
- Failing to recognise the UK consumer’s embrace of ‘niche’ retailing
- Failing to recognise the UK consumer’s love of aspirational brands
- Failing to recognise the UK consumer’s wish for low prices in certain categories of goods
- Failing to embrace online shopping despite the evidence all around them (ASOS, Next and Amazon, to name a few) of retailers aggressively grabbing market share
- Failing to delegate merchandise decisions to well-known, ‘real’ designers
- Failing to recognise the UK consumer’s preference for lifestyle and demographic definition in its store layout
- Failing to leverage its financial assets and make real changes to its stores that would represent the future and provide an ‘enjoyable’ shopping experience
- Failing to recognise the impact that a very fast changing retail landscape would have on physical space
All the above has meant that the company’s advertising and marketing has constantly missed the mark and, in some cases, made matters worse for the brand.
Do M&S physical stores have a future?
There is a social and community aspect of shopping. It can be an enjoyable day out for many people, so for M&S, its stores must have a bigger and more demonstrative role in supporting its online sales.
To be successful in this, remaining M&S stores must become places where ‘defined’ shopping can become enjoyable and be used as a showroom to boost the brand. Good retailers achieve this by:
- Ensuring the shop design mirrors the style of the shopper
- Playing differentiating music according to the area the customer is in
- Presenting ‘classics’ are in a way that embraces all age groups (for example, Uniqlo)
Note: Online sales of non-food items have soared over the past five years, from 11% of the total market in December 2012 to 25% in December 2017. Convenience is probably the most important factor behind this growth, with next day delivery being seen pretty much as standard now.
Will M&S’s new team set about embracing change and accepting the behavioural pattern of the world’s highest spending (per capita) consumer?
It’s never too late. (Witness Burberry)