M&S - Tough trading for food too?
18 November 2016
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So post the M&S results last week, where the things said by Steve Rowe certainly made sense, pull back on international, central office cuts and a focus on the customer and indeed stores.
All straight from the new CEO playbook of course; it's almost the first 90 days of a reign have to be taken up listening, visiting shops with the first release to the city detailing the cuts around the former CEO's projects, a central office cull and also looking at the store estate.
There are no sacred cows when a new man comes in, nor should there ever be of course. But for one reason or another, folk have pet projects and time is sunk into making things work, suddenly the wider market conditions (Brexit and inflation) mean that no further cash can be sunk in to something that may ultimately be a risk to the core business.
The best people are typically taken away from core duties to make other projects a success, so rowing back from the international side of things does make sense. There is enough 'trouble' at home for M&S.
Store closures are another sore point, it is terrible PR to do so but more acceptable than it was perhaps five years back to close down stores. Not only have rents / rates rose upwards, but the changing shopping habits have also rendered some of the areas where M&S are a big presence obsolete.
Shopping centres are popular whereas the older shopping centre with the expensive car parking and dingy surroundings are struggling. Especially with food becoming more important for M&S, they need footfall and those older locations won't necessarily provide that.
Of course I write with no guidance on location, it wouldn't be right to speculate (nor would I know where to start) but the store estate always needs refining. Things are changing all the time in terms of demography and indeed affluence, so a refining of the estate seems entirely wise.
The focus on food is noteworthy, as noted on the last mail it's the reverse of the JS plan but does seem wise for M&S to pursue this strategy.
However food like for likes were down and M&S still suffer with a 'boutique' feel in their food outlets. It's not possible to do a full shop, despite the array of great products. Brands came and went and some of the ranges can be expensive and beyond the core shopper too.
Their core ranges are sharp and the price matching with Sainsbury's is effective, right at the shelf edge.
Otherwise you can barely see it, nothing is made of it and the Sainsbury's cuts in own label have made some of the pricing hierarchy very lopsided.
Particularly in areas like Produce where the price cuts have been common, Sainsbury's taking their Cucumber into 49p forces M&S to follow, leaving a huge gap for the large Cucumber at £1.30.....
The M&S pricing has improved but there is still a real perception that they're expensive. Failure to provide a full shopping basket is partly a reason, alongside their heavy ranging tilt towards fresh foods and ready meals in particular.
However they have been busy expanding and improving their own label offering, their new ranges are sharp across the store and represent quality versus a price differential too.
A premium tier is also starting to emerge in a few categories, Oranges noted above and also there have been developments in Meat as well.... This alongside their core tier and the 'value' tier of 'Simply M&S' means each customer base can be catered for. Yet they're still viewed as being 'too' expensive for some....
The issue remains though that a 'full shop' isn't possible at M&S yet, further range work and development is needed to ensure they can entice customers in for this purpose...
The offers are generally centric to the Marks & Spencer value proposition, lots of 2 for / 3 for around fresh foods and ready meals, alongside their meal deal too.
The offer above makes little sense though; Green grapes are popular and customers may well want to mix / match with Red Grapes. However they're not on the offer - £2.50 for Green grapes and excluded from any multibuy promotion - not ideal...
A classic one to confuse a customer and also then question the value for money credentials....
There are few retailers worldwide perhaps who do as good a job on seasonality as M&S, they are truly superb throughout the year as the seasons / events change.
Summer was particularly solid for them and their Halloween package was also very strong too. It was notable to see that their Christmas ranges were very strong as they landed in stores from mid September with a full launch early November.
Chocolate Merry Men are one of many range extensions for Christmas; virtually every category has some sort of Christmas tilt (even Hot Chocolate / Coffee have Christmas related lines).
Their front of store displays work well too; the focus on Mrs Claus (advert) explains the postbox, with the Gold coloured premium ranges accentuating the quality offer.
'Tis the season for giving..... Will M&S be giving investors cheer in the new year with a decent set of figures? Perhaps not with the wider group, but the core food business should perform nicely.
Especially as it's Christmas, their pre order system is always popular and the premium offer works ever so well for the festive period.
But for the wider group, more woe on clothing and GM is expected (despite their excellent work on Christmas, the supermarkets are incredibly strong in decorations this year too).
The move to food makes sense for M&S and also for Steve Rowe given his expertise but also strength in building up that business. But it isn't as simple as bolting on more food space and watching the sales land in the till.
The food market is as competitive as it has ever been, and discounters are rapidly looking towards premium avenues to fuel their growth. Low prices and high(er) quality is a real focus for Aldi at the moment.
But M&S are doing a good job in food, more of the same and a tightening of the estate around non food and food space.
But why not more Uniqlo-esque clothing ranges? A great Cashmere jumper in 12 colours? Along with a GM range that is closer on price to the market movers like Next, Sainsbury's and even Asda would represent real development.
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From the Grocery Insight newsletter archive, first sent to subscribers on 18 November 2016. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.