Getting clothing right has been the challenge for every new CEO since 1999 when M&S began to lose its dominance of the market, but it always seems to elude them.
Three years after joining M&S and setting out his strategy for the business, Marc Bolland has mainly delivered on the investment in infrastructure, IT, logistics, store upgrades, international expansion and the new web platform. Meanwhile food has a clearly defined specialist positioning in the market and continues to grow, but he still has to deliver growth in the general merchandise offer and in particular, clothing. Indeed the fact M&S chose not to mention its home offer, when a rising housing market should be producing growth, suggests it is not doing that well either.
But clothing is at the heart of the M&S offer, especially womenswear. If it gets this right then it can produce growth across the chain because women are such a key influence on sales – they buy, or are major influencers on buying, across food, childrenswear, menswear, beauty and homewares.
There have been some signs of recovery in M&S’ clothing over Q4, though slight, and at least it has not continued to fall. Marc Bolland has laid out a clear strategy of style and quality and the presentation in store of individual brands has improved (and is apparently being executed throughout the chain, not just a few flagships) but it has to win customers who have been used to shopping at competitors and therefore needs to be much better, consistently. This is its challenge.
Indeed getting clothing right has been the challenge for every new CEO since 1999 when M&S began to lose its dominance of the market, but it always seems to elude them. And achieving success in clothing would have a big impact on M&S’ profits as margins are that much higher than in food. However, recent progress has been negated by the impact of promotions and markdowns, and producing the kind of margins Next achieves appears way beyond its reach.
That said the stores do look more inviting, ranges are merchandised far more attractively and the new website is a vast improvement. The ranges the new clothing teams are producing have desirable pieces in them and have been well received by the press, but M&S needs to build momentum to win back those lost customers and attract new ones. Delivering new styles farther down the chain will maximise sales potential and improve customer perceptions, but this has to be balanced with the ability to produce volume sales (and profit) without flooding the market.
This requires a fast and flexible supply chain and more direct sourcing to achieve speed and margin gains. Two new sourcing directors have been employed in the Far East and the plan is to increase direct sourcing from 20% to 60%. However it came as a surprise to me that direct sourcing at M&S is still only 20%, as surely increasing this penetration had been a previous CEO’s strategy? And this highlights a weakness – the potential to change the culture of the company into one that is fast, flexible and responsive to customer demand. There are signs of recovery in clothing, and the strategy makes sense, but M&S really has to speed up the execution before shareholders lose patience yet again.
- Maureen Hinton is group research director at Conlumino