TWENTY years ago, the UK was in recession and Marks & Spencer had just changed its boss: some things never change. Under Rick Greenbury, M&S went on to have a good 1990s, before over-expansion led to the inevitable and painful correction, under a new management team.
Twenty years on, the competition is much tougher and so is Marc Bolland’s job. M&S is still a key anchor for new shopping centres, but it has to compete for space not just with Primark but all sorts of international players in the clothing market, from Zara and H&M downwards, while the big supermarkets are a formidable competitive threat and online clothing shopping is all the rage.
M&S remains a great brand and it has survived, which is more than can be said of such erstwhile luminaries as Sears, Storehouse, Great Universal Stores and Woolworths. But it is symptomatic of the slow decline in M&S’s relative status that its market capitalisation of around £5bn has gone nowhere over the last 20 years and that Next has now nearly overtaken it in size terms (just as Tesco, Sainsbury and Morrison’s did). That doesn’t mean to say that M&S won’t still be with us in 2031, but the world is not standing still. Retailing is a dynamic industry and new retail players and channels will emerge in the next 20 years to further challenge its position.
If M&S is still to be a big retail player in 2031, it will have to learn three important lessons from the success of Next. The first is that management stability really does count: the top team at Next under Simon Wolfson has been remarkably stable, whereas at M&S the management always seems to be changing. The volatility in profits at M&S is not unconnected with that management instability.
The second lesson is that big retail brands now have to be very good at multi-channel and online retailing. M&S has been slow to emulate Next’s success with its home shopping business and a lot depends on its ability to catch up under new online guru Laura Wade-Gery.
The third lesson is that store modernisation needs to be a constant process. Consumers in 2011 have plenty of choice and by 2031 they will increasingly go to stores (and websites) that are exciting, as well as easy, to shop in. Next has kept its stores up to date, but M&S still has a lot of work to do, despite the promise of the new flagship at Westfield Stratford.
One unique thing about M&S, however, is its food operation (which accounts for half of UK sales). The big supermarkets expand inexorably, to try to eat M&S’s lunch, but if M&S can continue its lead in product innovation, make its stores more convenient and sustain its specialist credentials, M&S Food will remain a very profitable business. But given the pace of inflation, today’s “Dine in for 2 for £10” meal deal will probably have to be “Dine in for 2 for £20” in 2031.
M&S’s biggest problem is that though everybody loves its food, even the younger customers, not everybody loves its clothing. Yet M&S still tries to appeal to everybody. By 2031, let’s hope that M&S has worked out who its core customers really are and how to keep them happy.
Nick Bubb is a retailing analyst.