The M&S Revival
By Ian McGarrigle

“We have gained market share in all areas in which we trade. We continue to invest in our stores to provide for future growth.” Stuart Rose, chief executive, Marks & Spencer’s.

With consumers increasing their shopping visits to M&S, it is clear that the brand has not only been revived, but has also re-established itself as a trend-setter.

The year 2006 will go down in UK retail history as the year that Marks & Spencer came back from the dead. The company, its senior management team and above all, its chief executive, Stuart Rose, have been showered with praise, recognition and industry trophies for a year, which saw M&S’s fortunes literally turn around.

Up until late 2005, industry experts continued to look at the market share figures and company turnover and profitability and to speak openly about one of the world’s most admired retail brands passing into new ownership or, and even worse, collapsing.

One year on and in November 2006, Stuart Rose was able to report to the financial community that sales for the half year had risen 11 per cent and profit before tax up 32.2 per cent to £405 million and therefore raising the prospect of the business breaking through the £1 billion profit barrier again–something it hasn’t achieved since 1997. The company, said Stuart Rose, was “firing on all cylinders” and all the statistics point that way with 19 million extra shopper visits being recorded for the six months ended September 30, 2006.

Marks & Spencer is once again setting the benchmarks for all retailers to follow and that includes the UK leader, Tesco. Market share gains are being recorded in all its key merchandise categories where it had previously been surrendering percentage points for some years. Those market share gains could also be seen in food which moved 20 basis points in the 24 weeks ended October 8, 2006 according to Superpanel Food and Drink research, moving from 3.8 percent to 4 percent.

Such a move in its food category where Tesco, Waitrose and Sainsbury had successfully moved to steal Marks & Spencer’s position for premier, convenience-driven quality food marks a significant turnaround.

Reinvention

The big question that all retail commentators are now grappling with is: How has this seemingly failing one-brand business been able to turn itself around so relatively quickly? For Stuart Rose, the answer isn’t difficult and it distills down to a mantra that he has been driving home constantly since he took over the business in May 2004 and which he reiterated when delivering the half-year results. “We have delivered better product, better service and better store environment,” he stated.

As with all business mantras however, the words sound easy, but it is the execution that proves harder. “Retail is a simple business made complicated by management,” Stuart Rose has been quoted as saying. His team has won plaudits for the way that it has kept the focus around the strategy to improve product, service and store environment. Single-mindedly and against much media criticism, the company spent millions of pounds on customer service initiatives including the controversial use of expensive motivational speakers and coaches. The stores, which had become confused in their layout and tired in their appearance, have received over £500 million of investment that has seen nearly a third of the store portfolio refurbished and modernised. M&S announced that it would be spending a further £800 million to complete the task, making it one of the biggest ever store refurbishment programmes undertaken in UK retailing.

Then there is the brand itself. Stuart Rose often reminds people that he began his retail career at M&S. This has given him a clear understanding of the qualities of the brand and its customers. It has always had a unique position within UK retailing for its broad consumer appeal led by quality product and good value prices. For much of its history, over 90% of product was sourced and manufactured in the UK, which became a key brand value. Its move into food was also based on premium quality and innovation in product development. M&S introduced the concept of ready meals to the UK consumer and convenience food.

The collapse of UK apparel manufacturing and the rise of the supermarkets brought these brand values under intense pressure and the company had struggled to move with the times and to understand what a younger consumer base was looking for. By holding on to its older consumers the previous management was alienating its younger, potential customers.

For Stuart Rose’s key management team, the answer around the brand remained just as simple – to have the right product at the right price and to be in stock at all times. In food, the solutions were developed further with a renewed emphasis on great product innovation that could then be advertised in a persuasive and seductive way. M&S’s television advertising campaigns that have since been showered with creative awards from the advertising industry, made their food the centre piece with the copyline that is now enshrined in popular culture: “not just food, M&S food.” One of the featured items, a chocolate pudding, saw sales increase 288% and it is estimated that M&S has increased profits in its food categories by £74 million as a result of extra sales.

Look Behind the Label

In January 2006, the company used the beginning of its revival to make a powerful industry statement. Recognising one of the fastest growing consumer concerns–food safety and fair trade–M&S surprised everyone with the bold launch of a company-wide initiative which it called “Look behind the label.” Seizing on its strength as an own label business with accepted brand integrity, it began promoting the fact that it was committed to the highest possible health, quality and environmental standards. Speaking a few months earlier at an industry conference, Stuart Rose had remarked that it had always had among the highest standards of sourcing and supply in the industry and that more people needed to be aware of that.

When “Look behind the label” launched, an advertising campaign appeared in all media and the stores heavily promoted this high-profile commitment to healthy eating, ethical sourcing and fair trade. It focused around a series of striking slogans designed to show the company’s stance on a range of areas including: Fairtrade, animal welfare, environmental concerns over packaging and waste and food safety.
Speaking at the launch of the campaign, Stuart Rose said: “Customers want good value, but they care more than ever how food and clothing products are made. Look Behind the Label is the first time we’ve talked about the lengths we go to ensure everything we sell is produced in a responsible way. Our customers increasingly want to know about this, which is why we’ve decided to tell them what we stand for.”

Fairtrade Practice

One of M&S’s biggest commitments within the campaign was around Fairtrade. It announced that it was the first UK retailer to sell products made with 100% Fairtrade cotton. M&S also stated that all its coffee and tea would be Fairtrade from April 2006. This move is estimated to increase the value of all Fairtrade instant and ground coffee sold in UK supermarkets by 18% and Fairtrade tea by around 30%. The company said that it was given the confidence to make this switch after selling Fairtrade coffee only in its Café Revive coffee shops where it was clear that customers were willing to pay a premium.

M&S continues to work closely with the Fairtrade foundation to develop its ethical sourcing policies and is broadening this to other areas such as working with South African flower growers.

In healthy eating, the company has pledged that no genetically modified food ingredients are used in any of its products. It has also reduced the salt content and has developed a new range under the “Eat Well” brand which promotes healthy eating and ingredients.

Over 30% of the M&S food range now promotes this brand which means it is free of additives and preservatives with a continued commitment to extend this further. With consumers increasing their shopping visits to M&S, it is clear that the brand has not only revived, but it has re-established itself as a trendsetter. M&S has successfully shown that a 100% own brand business is not disadvantaged against other retailers, but on the contrary it can use its new found confidence to set the benchmark again for all others to follow.

At its company results in November 2006, M&S also declared that it is reinvigorating its international expansion which raises the prospect that the benchmark for Fairtrade and ethical retailing standards has been raised for many other retailers to compete against.