UK retail giant Marks & Spencer (“M&S”) recently announced its latest plan to reverse a long decline in financial performance…
“M&S has confirmed it will close 30 UK stores and retreat from 10 countries as it embarks on a sweeping restructuring plan that will promote its successful food business ahead of its struggling clothing arm.
The high-street retailer also recorded a huge drop in statutory profits for the first half of the year, after making changes to staff pay and closing its defined benefit pension scheme.
Under new boss Steve Rowe, who took up the top job in April, M&S will launch a five-year plan to refresh around 100 UK stores, or 25pc of its estate. Thirty stores will close, while M&S plans to open 200 smaller Simply Food stores by the end of the decade. The scheme will cost around £50m a year over the first three years, rising to £100m for the last two years.
In addition, M&S will close 53 loss-making international stores and exit 10 markets, as it switches its overseas business to a franchise model. This will result in a charge of £150-200m in the next 12 months, it said, and will see the closure of its flagship stores in Paris. M&S already has 267 franchised stores globally.”
Full details at…
“Marks & Spencer confirms shop closures…”
Since its heyday in the 1990’s, M&S has endured a long slide from financial grace. To be fair, it’s not alone among retailers in struggling to deal with the current (extended) recession and the disruption caused by the Internet revolution. From the November 2016 “No B.S. Marketing Letter”…
“RETAIL REELING. Macy’s is closing 100 stores by early 2017. Sports Authority, bankrupt, closing 450 stores. Wal-Mart closing 269 stores, slamming brakes on new stores in the U.S. and diverting a billion dollars or so into admittedly trying to play catch up to Amazon in ecommerce.”
In the UK, sort-of M&S competitor British Home Stores closed its doors earlier this year, the latest in a string of High Street casualties.
So what business and marketing lessons can we draw from this? Firstly, a general point for retailers from Dan Kennedy…
“…ordinary retail is a dead-man-walking. If you are in retail, you’d better fast figure out how to be very, very ‘special’ to a select clientele for whom lowest prices don’t matter.”
Looking specifically at M&S and its current situation, these marketing points occur to me…
(1) Not an original observation, but M&S can be regarded as 2 separate businesses, currently grouped together. There’s the highly successful food operation that originally was something of a sideline but now is a powerhouse. And there’s the original clothing and general merchandise business, that is struggling. The new plan, sensibly, looks to build on the successful side of the company and shrink the less successful side. More harshly, cut losses and do more of what’s working.
(2) On the clothing and general merchandise side, M&S seems to have realised that customers need a (good) reason to visit a physical store. To some extent, shopping for clothes is still a physical “experience” (people like trying on clothes before buying). However, small stores with a limited selection (and M&S has a HUGE range of clothing, arguably far too big) are NOT compelling destinations. Sensibly, M&S seems to be closing smaller stores and concentrating on larger stores that really can offer customers more of an enjoyable shopping “experience”. As an aside, why is M&S still in the “general merchandise” business? They don’t seem to have any competitive advantage. In an era of specialisation, the name itself indicated the problem!
(3) M&S seems to have admitted defeat (again) in its overseas business. The company is the latest in a long line of UK retailers (e.g Tesco) who have come to grief on foreign shores. Unless you have some compelling universal offering, then it’s going to be hard for a retailer to replicate success abroad. For a middle-market company like M&S, being “quintessentially British” isn’t going to be enough to appeal outside of a certain niche. For sure, that niche will be there but it’s probably best served through the franchise model they are adopting.
M&S may have its problems, but it also has many strengths that will (probably) mean it will continue in business over the long term. The food business, has been mentioned. It’s also has a reasonable ecommerce operation and is well placed to make a “Clicks and Bricks” strategy work. There’s a membership program and a still very large (and pretty loyal) customer base.
So, much to work with but, like all retailers, M&S will need to continually work on understanding and delivering what it’s customers want. The biggest ongoing marketing strategy debate over M&S (and this has been going on for years) is defining exactly who their core customer is (generally regarded as “older” women) and how best to deliver what they want.
On balance this restructuring plan looks sensible and should deliver some positive results. But all retailers face a difficult future so I wouldn’t be at all surprised to be reading about another “turnaround” plan in a few years time…probably when the next CEO takes over!