M&S CEO talks digital, culture and data

In an opening keynote at Retail Week Live on March 3 2018 in London, executive editor of Retail Week, George Macdonald, interviewed Marks & Spencer CEO, Steve Rowe about the British retailer’s ‘digital first’ strategy

You’ve decided to take a ‘digital first’ approach. What does ‘digital first’ mean to you and for M&S?

Steve Rowe: Retailers try out ‘digital first’ a lot. Firstly, let’s be clear, the world of mobile is here and we need to lead with ‘mobile first’ to connect with our customers and colleagues in a mobile, agile way. Secondly, you need to work faster and smarter and fail fast – that’s an ethos important in our culture where we traditionally gold plate everything. We need to do better. Thirdly, we have to be aware – and on top of – digital transformations and technologies. We’ve got digital warriors all over the business making sure we are building new applications, new technologies, both for online and also for our stores. ‘Digital first’ is something we’ve been behind on, and it’s something we need to change rapidly in the near future. 

How do you change the culture in a company like M&S?

Steve Rowe: Our profits have gone nowhere in nearly ten years, our top line hasn’t changed, and our cost base continues to go up by about 2%. There’s an unhappy collision of those two lines at some point in the future. Now we’re not there yet, we make a lot of money but could do more. We need to be brutally honest with ourselves. I’m a big believer that you have to tell yourself where you stand, and you have to lead from the top.

"One of the problems is that we’re drowning in data – we actually have too much that we can’t join together"

What will the M&S estate look like in a few years?

Steve Rowe: It’s a terribly difficult thing for a business that has been around for over 130 years to close shops. But no one will deny that the shopping patterns have changed. A third of our business will be online in five years. We have around 330 main stores in the UK and I’ve already said we will close around 100 of those in the next two to three years.

What do you see as the relationship between the store and the digital opportunity? Where does the shop fit in the ‘digital first’ strategy?

Steve Rowe: 72% of merchandise bought online at M&S is picked up in store. We need to increase the number of touchpoints for customers, and our stores are one of those touchpoints for customers. We’re increasing collection points and touchpoints – they are vital to each other. You need to play in both areas if you want to have scale. It’s interesting that many of the pureplays are already starting to get stores. It’s ironic that Amazon bookstore – the very thing that closed book stores – has actually opened a bookstore, with books in! This integration with the customer is really important.

How do you envisage being able to use data to run stores better?

Steve Rowe: One of the problems is that we’re drowning in data – we actually have too much that we can’t join together. We have our Sparks card, our loyalty programme, which for the first time is starting to join up lots of the dots. We’re very rich in data, pretty much every adult in the UK comes to our stores once a year. We need to use that data to increase our customer lifetime value and make sure that we know our customers, know what they want and make sure we can grow the lifetime brand with them across the business.

We’ve been losing customers for at least eight years and it’s a terrible place to be. Before Christmas, for the first time, we actually gained customers back in the business. Part of the reason for this is that we’re focusing on the way people join the business. We need to bring new, young customers into the business. Take school wear for example, we went back to being number one supplier for school wear in the UK, with a market share of 23%. We then have to branch that relationship into kids wear, which can then develop into women’s wear.

We are the market leader in bras, with 35% of the market, it’s the highest it has ever been. With that intimate relationship with females, if we can nurture that and develop it, it’s another spring into the business.

"The back end is being held together by sellotape at the moment"

What digital innovations at M&S have you been most pleased with?

Steve Rowe: We are doing some fantastic things with AI at the moment. We have an ambition that 50% of our contacts at the call centers will be using AI on people.

We’re pleased with how we are using some digital technology. If you go to White City, we’re using something called Tuesday – an online style advisory, with colleagues, with mobile devices, with a fitting room which is digitally enabled and you can actually use the mirror to check stock, sizes, customer reviews. It’s a mirror that records images in real time on delay. Most importantly, women can then Facebook or Instagram those images to their friends or colleagues. I’m really pleased with how we’re using things like Tuesday to bring to life our stores.

Are there any plans for a food delivery service?

Steve Rowe: There is a very small trial happening. Our digital team put together an online delivery service, mobile based, we started the work in April, we will test in June, we’ll go live to customers in July and we got results out of it in September. That’s an agile business! We did that for less than £600,000. Admittedly, the back end is being held together by sellotape at the moment. We are very pleased with some of the results we got. What we’re interested in is whether our customers would like it, does it increase the basket, and are they willing to pay for the service?