Addressing investors at Wembley Stadium last month, Marks & Spencer chairman Archie Norman made crystal clear that, despite being a much-loved British brand, M&S does not have a ‘God-given right to exist’.
Not pulling any punches, the retail veteran warned that M&S is now standing on a ‘burning platform’, after being too slow to evolve over the last two decades.
But the retailer isn’t resting on its 134-year old laurels any longer. Norman, alongside chief executive Steve Rowe, is evidently unafraid to upset the apple cart if it means securing a future for one of the UK’s most-loved High Street names – and an employer of 85,000 people – in the new, digital world of retail.
M&S is one of the UK’s most-loved High Street names – and an employer of 85,000 people
Earlier this year, for example, the firm decided to axe 100 stores, putting hundreds of jobs at risk. This painful move, that will leave wounds in many national High Streets, cost the firm £321.1m in its last financial year.
But, in these current retail climes, it’s do or die for M&S, with the latter not as distant a possibility as some may think.
Its share price has been on a downward spiral since May 2015, trickling from a near 8-year peak of £5.83 per share, to rock-bottom lows of £2.65 in April this year when some initial closure plans and top-tier people moves emerged.
Now, at around the £3.08 mark, M&S’ market value stands at just over £5bn – less than online fashion firm Asos, worth £5.1bn. And, while online grocer Ocado rocketed into the FTSE 100 and the last quarterly reshuffle, M&S narrowly swerved relegation.
These events were both considered signs of the times – emblematic of the arrival, in earnest, of internet shopping into the mainstream, as well as the hearts, minds and pockets of investors.
And, while the firm is still profitable, earnings are in decline. After stripping out store closures costs, M&S’ pre-tax profits fell 5.4 per cent to £580.9m last year.
So, to say things need to change is an understatement, and a reality the M&S big cheeses are wide awake to now.
What’s changing at M&S?
Well, we already know there will be fewer M&S stores on the High Street, a strategy that aligns with the spread of online shopping (retailer’s own websites often cannibalise their store sales) and simultaneous rising costs such as wages and business rates.
While a round-100 clothing and home stores have already been earmarked for closure by 2022, Norman refused to rule out the possibility of more closures in the future, nor more job losses, as remaining lean and agile is a key attribute of a successful, modern retailer.
But, for the stores that remain there are changes afoot.
In terms of your regular shopping visit, you may not notice much at first – the retailer is in just the first stage of a five-year turnaround plan.
M&S is hoping to drive footfall to stores as well as boost its online sales
But it has already started hanging with a trendier crowd, in the hope that its new, tech-savvy friends will have a positive influence on its performance both in store and online, where it hopes to eventually generate a third of its clothing and home sales.
Earlier this week, it unveiled a new partnership with Founders Factory to create and develop 18 retail start-ups, which is meant to give M&S exclusive access to the technologies that could propel it forwards.
And, in June, the iconic brand struck a deal with Microsoft to experiment with Artificial Intelligence as a way to improve its in-store customer service.
In other parts of the retail sector, AI has already been used to cater shopping suggestions to individuals, create efficiencies and speed up sluggish processes, so M&S hopes it will be able to follow suit as more applications of AI are unearthed.
While, on the one hand, toying with the latest tech is not guaranteed to safeguard the business, it does ensure M&S is on the same page at the highly valued tech unicorns – like Apple and Amazon – rather than always being one step behind.
Another sign that M&S is keen to stay ahead in the fast-changing market is its ongoing product innovation, especially in food, where the retailer is always trying to set trends rather than follow them.
The retailer was the first UK grocer to launch Chouxnut, for example, an éclair-doughnut hybrid which originated in San Fran, and comprises a doughnut shaped choux pastry bun filled with creme patisserie.
M&S desserts product developer, Daniel Fletcher said: ‘This summer we wanted something super trendy to attract the new young wave of afternoon tea lovers.’
Likewise, it has launched a new summer drink – GinKing – that blends English sparkling wine, gin and spring water.
It remains to be seen if M&S’ GinKing will fly off the shelves, but, it will prove a good footfall driver if so – much like the Gareth Southgate waistcoat that took football fans by storm earlier this month.
One of M&S Food’s latest releases – a blend of wine, gin and sparkling water
It’s not just the clothing and home department that has its sights set on online sales, M&S dipped a toe, albeit tentatively, into online grocery delivery last year too, with a small pilot in Camden and Woodley, near Reading.
The M&S ‘best ever burger’ also made waves, with the retailer claiming a year of obsessive development went into its creation
The retailer will need to expand the pilot further to get a gauge of the demand for an online food offer, or partner with another company to get the proposition off the ground, but the wheels are clearly in motion.
And, if you’re a M&S Sparks card holder, prepare for a total relaunch. M&S has drafted in Starcount – a firm headed up by Dunnhumby founders Edwina Dunn and Clive Humby, who were behind Tesco’s Clubcard – to overhaul the loyalty scheme, which launched in 2015 but is not currently living up to expectations.
Meanwhile, in the background, the firm is trying to fix a deeply ingrained company culture, modernise its supply chain, exit old legacy systems and make improvements to its ‘too slow’ website, so it can offer an online experience to match the hot competition in the sector.
But will it work?
M&S is making some of the right noises but, according to TCC global insights director Bryan Roberts, its transformation needs to be ‘focused on products more than anything else’.
‘It can have all the the tech partners and bells and whistles it wants but until M&S has womenswear cracked, it’s going to find it tough. If it can do that, everything else will follow,’ he tells This Is Money.
Boss Steve Rowe at the revamped Bromley M&S in the Glades Centre
It’s no secret that while M&S remains highly prised for its women’s basics and underwear, it lost its way in fashion – either isolating older shoppers by targeting too young and edgy an audience, or by being too humdrum and sensible to attract a new generation of fans.
Roberts argues that M&S, which has an ‘ageing shopper,’ needs to decide who its target audience really is.
‘There’s a lot of affection for the brand across all age groups, but M&S stands or falls now on its womenswear collection,’ he says.
‘While the news around this department has been slowly getting better, the business still has a long way to go in terms of its range and positioning. And when M&S does hit the nail on the head with a product, it goes immediately out of stock!’
For Marks and Spencer, clothing is a department is is trying to gain more traction in
The solution, Roberts’ suggests, is to move away from its traditional seasonal approach to fashion and, like Zara and Primark, try to be more reactive.
As for its food division, which has newly appointed grocery veteran Stuart Machin at the helm, the main issue, Roberts says, is creating a range to live up to the M&S price-point amid fierce competition.
‘If it wants to be the aspirational trolley shop, it needs to have range and the price to accommodate that within the realities of today’s squeezed market – it’s in the same boat as Waitrose,’ he says.
It’s clear there are serious efforts being made to move M&S forward and embrace change. The question is whether it is too late or just in the nick of time.