Analysis: Hard-pressed M&S playing omnichannel catch up

Can under pressure Marks & Spencer stage a comeback, or is its plan to make the business faster, digital, lower cost and more agile, a case of too little too late?

M&S is set to close 100 stores by 2022, as part of its five-year transformation plan. Whilst it’s good to see the company finally addressing an oversupply of retail space, there must be some long overdue substance and vision here. It must now ramp up online investment and overhaul its remaining stores, eCommerce offering and “an inefficient supply chain” for an omnichannel world.

Key here is the fact that our shopping habits have radically changed and many traditional retailers have not been keeping pace, leaving customer-centric pureplays like Amazon and Asos and discounters like Aldi and Lidl to muscle in on their territory. M&S has been one of the worst offenders, losing once loyal customers via tired stores, a sluggish website and uninspiring product ranges.

As Dr Felicity Hardley, senior lecturer in marketing and business strategy at Westminster Business School, puts it: “We are moving into an experience economy where the customer journey is paramount. Online providers understand this and have engineered their whole service offerings to more adequately meet customer needs and expectations. Many existing retailers are still playing catch up and this may cost them dearly in the long run.”

The cost to M&S was on full display this morning as it announced a 62% fall in pre-tax annual profits to £66.8 million from £176.4 million in 2017. Like-for-like sales in the fourth quarter fell at both its food and clothing business, while costs in the UK have risen. Even eCommerce performance (+5%) was behind the market.

Fiona Cincotta, senior market analyst at City Index, said: “With Primark nipping at its heels, it's only a matter of time before M&S loses its crown as the UK's biggest clothing retailer. Like Mothercare, it has resorted to a strategy of less is more to get itself back on track. But all those store closures won't amount to much if management can't add more flare to its clothing range and revamp its store layouts. Looking at today's results, those efforts are still very much a work in progress.”

In addition to continued migration of clothing and home online, the development of global competition, the growth of home delivery in food and the march of the discounters, various other issues loom large. M&S admits that its supply chains in both clothing and home and in food require significant upgrades, its online capability is behind the best of its competitors and its website is too slow. Whilst the fulfilment centre at Castle Donington has struggled to cope with peak demand and some of its systems are dated. 

In response, M&S is certainly saying the right things. Clothing and home stores will be “larger, digitally enabled, better located and more inspirational for customers to shop. They will also be supported by a seamless online experience across all digital channels including mobile and social, and by a conveniently located network of food stores that offer customers a next-day collect in store service for clothing and home purchases.”

Improving capacity

Ten thousand Honeywell mobile devices have, meanwhile, been rolled out in stores. The website is being improved and there is investment to increase and improve eCommerce capacity, including at the Castle Donington site in order to support its ambition to double the online share of clothing and home sales to over 33%.

A new retail distribution centre is being built at Welham Green. Teams have been established to address the supply chain issues in both main businesses, to deliver a faster, lower cost network. And a long-term partnership has been established with TCS to improve its technology base, with migration being greenlighted, off legacy systems and an old mainframe.

The message is clear: these are challenging times but transformation is well underway. Will it, however, be enough to address a narrowing customer base, a fast changing high street and increasingly aggressive competitors, whilst also winning over younger tech-savvy shoppers?