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The 2014 Christmas trading results for Marks & Spencer were more disappointing than anticipated, with general merchandise sales falling 5.8% in Q3 (analysts predicted a 3% fall). Although M&S have consistently performed well in food as sales rose 2.8%, their UK performance (1.1% like-for-like decline) is not reflective of the UK retail environment. M&S have struggled to compete with the robust omni-channel strategies of Next and John Lewis, with the latter in particular having posted an impressive state of results thanks to the enormous success of their ‘click and collect’ policy which accounted for over half of its online sales. Marks &Spencer’s failure to utilise its new hi-tech distribution centre in Castle Donington has had disastrous effects with the retailer having to pull the ‘next day delivery’ service before Christmas and many consumers having to wait up to two weeks for deliveries. Word quickly spread on social media and consumers seem to have lost confidence in M&S’ ability to deliver online purchases quickly and it is highly doubtful the retailer will be able to turnaround its dwindling performance in Q4.
Marks & Spencer has managed to avoid being embroiled in the current food price war between ‘the big four’ (Tesco’s/Sainsbury’s/Morrisons/Asda) and the German discounters (Aldi/Lidl) thanks to its unique positioning in the UK. Their overall food sales outperformed the market with an increase of 2.8% versus the previous quarter but were unable to build on a strong Christmas in 2013 with like-for-like sales only growing by 0.1%. Its standalone food stores tend to have prime locations nearby offices for ‘the lunch trade’ and in travel locations (e.g. train/bus stations and airports) where price is outranked by convenience. Euromonitor International estimates Marks & Spencer’s food business to be worth 24% of its total in-store value sales for 2014 and is expected to maintain its value share for the foreseeable future.
CEO Marc Bolland started a radical restructuring of M&S’ apparel operations in 2014 with the promise to directly source 60% of its clothing by 2017. We saw the beginnings of this strategy start to take shape in November 2014 as Bolland announced they had increased their internal sourcing from 20% to 25% of overall clothing, with 35% expected by the end of 2014. With more control over direct design and manufacturing, it will allow M&S to respond quicker to consumer demands and improve speed and efficiency in their supply chain. However, M&S has been slow to embrace the potential of online shopping, with Euromonitor International estimating the online apparel and footwear market to be worth over £9 billion in 2014, and online sales fell 5.9% in Q3 despite having recently overhauled their transactional website and mobile app.
Marks & Spencer truly embraced the US discount craze ‘Black Friday’ in 2014 for the first time as it promoted a four-day sales weekend both in-store and online advertising discounts of up to 30%. However, the retailer’s distribution centre struggled to keep up with demand and its sales took a major hit with womenswear posting a like-for-like decline of 5.8%. Marks & Spencer must learn from the fiasco of the delayed deliveries and embrace a true omni-channel strategy akin to John Lewis and Next if they are able to seriously compete as an online retailer in the future.