This is not just any retail meltdown... it's an M&S retail meltdown
Non-food sales have slumped at the iconic store, and it's not even certain that changes at the top can stop the rot. Liam O'Brien wonders where it all went wrong for Marks & Spencer
Wednesday 11 July 2012
It's a British institution, a hardy perennial of the high street that has been trading for 128 years, and – as it's "Quality worth every penny" motto proclaimed – the place to buy clothes for any occasion. Its green logo conveyed the store's solid reliability, and in 1988 it became the first UK retailer to report pre-tax profits of £1bn.
But the past decade has not been kind to Marks & Spencer, and yesterday the company reported that like-for-like sales in the past quarter had fallen by 2.8 per cent. Sales of food were up by 0.6 per cent, but general merchandise was down by 6.8 per cent in the 13 weeks to 30 June. A statement released by the company showed that the home section had delivered a "positive performance". Instead, it was clothing that was to blame for the worst quarterly figures since Arcadia mogul Sir Philip Green launched a takeover bid in 2005.
As the figures emerged, Marks & Spencer announced the departure of its executive director of general merchandise, Kate Bostock, by "mutual consent". Ms Bostock, who will step down from her £944,000-a-year position on the board in October, was believed to have had a strained relationship with the current CEO, Marc Bolland. The chairman, Robert Swannell, thanked her for her "significant contribution" to the firm, and online retailer Asos refused to rule out poaching her for its swelling business. Ms Bostock's role as the queen of British retail has been divided in two. John Dixon, who transformed the Simply Food brand, will now lead general merchandise. He will be aided by part-time "style director" Belinda Earl, who will work for between two and three days a week.
It is not difficult to see why she was appointed. Ms Earl was responsible for ridding Jaeger of its mumsy image and turning it into an essential London Fashion Week ticket for any self- respecting fashion editor.
But the decision has met with scorn. Neil Saunders, managing director of analyst firm Conlumino, said: "With a business the size of Marks & Spencer, you need someone working full time with experience in fashion. It feels like a compromise to me. Both of them are very talented, but it feels like a piecemeal approach."
But why is M&S suffering so badly? Outside one store in London, customers found it difficult to fathom. Stylish Marcia Jones, 35, said the fashion had "improved over the years," and that she shopped there often.
Older customers were even fonder. "You can change the clothes without any quibbles if they're the wrong size, and the shop is always clean," said one. Another added: "My only complaint is that the quality of the material isn't as good as it used to be, and I've been shopping here for years."
In the cut-throat world of retail, being kind to customers returning their stock just isn't enough, and analysts took delight in savaging the retail giant's clothing wares.
"Turning around Marks & Spencer fashion is like turning around an oil tanker," said Mr Saunders. "It's a game of two halves: Simply Food has been robust and that reflects the innovation and quality that goes into the product. But when you move over into clothing, it's very staid and it's difficult to see who it is being targeted at.
"It's not clear why something in the Autograph collection costs more than the Classics collection, it's not presented in a different way. And when shoppers are confused, that's when they take their custom elsewhere."
When Twiggy re-signed a deal to promote the M&S brand in 2005, a couple of expensive new television advertisments emerged to celebrate the fact the store had finally brought itself up to date with the latest trends. Its models were more accessible than those used by high fashion brands, but they didn't patronise shoppers with messages about "real women".
In 2007, singer and television presenter Myleene Klass signed a deal worth a rumoured £1m to front the campaign, and it is hard to imagine other celebrities such as Dannii Minogue settling for anything considerably less. These adverts stopped the rot, and the freefall in clothing sales of the early 2000s ended.
In April, a similar campaign launched, featuring Gary Barlow as well as Twiggy and Klass. And yet it appears to have had no effect. Mr Saunders claimed it was down to the fact that people have realised the glossy adverts don't match up to what is on offer on the shop floor.
"Marks & Spencer has been very good in terms of marketing, and the adverts are very aspirational. But the reality of the stores and the product is very different. They're not brave enough, and they seem to pussyfoot around and the result that you see in the stores is underwhelming. The adverts show they know where they need to be going, but they need to change the stores and product," he said.
And the "substantial fall" in sales isn't necessarily down to the current economic climate or – as the company claimed – "unseasonal weather conditions". Conlumino estimated that in the same 13 weeks, clothing sales were up by 1.9 per cent, meaning the firm's market share has shrunk considerably. It only compounds the misery piled on two weeks ago, when its value was surpassed by Next (£5.1bn to £5.29bn).
These are tough days to be a middle market retailer. Online shopping is becoming an ever greater threat, and the market is increasingly polarised.
"High fashion brands such as Burberry are doing very well, as are low end, cheap and cheerful brands such as Primark," said John Ibbotson, co-founder of Retail Vision.
But to reinvigorate their sales, there's no point in changing direction, he said. Instead, they should focus on "their core customers, and make sure their offer appeals to the older middle classes".
Going out... Kate Bostock
Impressed Stuart Rose, former executive chairman of Marks & Spencer, with her successes as product director of Asda's affordable George clothing line. She also impressed, initially, as executive director of general merchandise at M&S, and at one point there were rumours that Bostock, now 54, would succeed Rose. Instead, she will step down later this year.
... coming in: Belinda Earl
Started at Debenhams as a Saturday girl, and became its chief executive in 2000 aged just 38. She joined the Jaeger group as CEO in 2004, but left owing to ill health earlier this year. Now she is joining Marks & Spencer as part-time style director.
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