MFI must address outdated strategy

The exodus of senior marketers from furniture retailer MFI may be symptomatic of a deeper marketing malaise at the chain. Their departures come amid a wide-ranging reorganisation of the business.They leave the company’s 28m ad budget – one of the largest of any UK retailer – without a senior executive directly responsible for it.

Last week MFI lost merchandising director David Tracey (MW June 25), who had assumed marketing responsibilities after marketing director Neil Palfreeman left in November (MW November 13). Two marketing managers, Mike Graham and Ian Fox, left at the same time. None of the three men were replaced. Managing director Matthew Ingle has assumed responsibility for marketing.

MFI announced a 10m fall in profits to 60.4m for the year ending April 25 1998, on sales up six per cent to 894.8m. In a massive reorganisation, it will make 1,500 staff redundant across its branches, distribution network and central administration. Plans include focusing on bedrooms and kitchens, axing upholstery, textiles, housewares and smaller products. A new store format is to be introduced, with warehouse space axed in favour of home delivery.

These poor results come after other retailers in the furniture sector have seen a similar downturn in profits over the past year. Last week, Carpetright suffered a nine per cent drop in profits from 32m in 1997 to 29m this year. The City reacted swiftly and cut the company’s share price by 13 per cent.

Carpetright chairman Lord Harris commented ominously: “If you think it’s bad for us, wait until you see how the others are feeling it.”

There are a number of reasons for the sector’s reversal of fortunes. Clearly, fortunes are linked to fluctuations in the economy and the housing market. Observers say that higher interest rates, and job insecurity – particularly in the North – have combined to make consumers wary of making big ticket purchases.

But there are other problems, particular at MFI, which have affected the chain’s performance. MFI was one of the first retailers in the late Seventies and early Eighties to sell from out-of-town sites. Observers believe some of these locations were badly chosen and are on the periphery of where people shop today.

MFI is also under fire for its out-dated product range. Most observers agree that MFI products have not kept pace with contemporary design. Eddy says: “It is legitimate to debate that the goods on sale at MFI have not moved with the times.”

The City view is that these problems stretch back to the management buyout in 1987. The mbo was headed by managing director John Randall and six other directors, who bought the company from Asda for 717m.

Some argue that even though the company was floated for 760m, it still needs an injection of funds. This is the main reason MFI has failed to build new sites to replace its first generation of out-of-town sites. The company has 185 stores across the country.

Credit Suisse Boston retail analyst Sean Eddy adds: “MFI looks very challenged. And the question is: does the management have the time and capital to get it right?” What the company needs, many argue, is a backer prepared to build new sites and invest in higher-quality merchandise.

But Verdict Research retail analyst Clive Vaughan does not believe the location of MFI’s sites is a problem: “The real problem is that they are too small. MFI stores are 30,000-to-40,000 sq ft, while Ikea’s stores are typically 100,000 sq ft.” Ikea uses this extra space to sell a wide range of household accessories.

“Ikea is a lifestyle message,” says Vaughan. “People travel to go to Ikea because they enjoy shopping there. They wouldn’t do that to go to MFI.

“MFI has tried to introduce smaller household items to its stores with the launch of its Homeworks format. But it has been a limited success, simply because MFI stores do not have the space to stock a meaningful range.”

Vaughan argues that the seemingly low regard in which MFI’s marketing department is held in is reflected in its brand performance. “MFI has improved the quality of its products since the beginning of the decade, but very few realise that. It has two good brands in Hygena and Schreiber but they have been devalued and not exploited.”

The consensus in the ad industry is that furniture retailers are at the position supermarkets were 20 years ago – all trading is done on price, with service coming a poor second.

Some say retailers’ fixation on price borders on sharp practice. One observer adds: “This market is full of confusion pricing. These stores constantly have sales on.”

Tim Lindsey, chief executive of advertising agency Lowe Howard-Spink, claims service has become key to retailers retaining and attracting new customers. LH-S handles the advertising for Tesco and last month won the ad account for Courts.

Lindsey adds: “Supermarkets have concentrated on service, and that has affected other retailers. People now expect retailers to be at the leading edge of customer service.”

New Courts advertising appears in the autumn. Lindsey says: “It will promote the service elements Courts offers. The chain has an interior designer to advise customers. It also has a range of after-sales guarantees which we may also highlight. Courts, and a lot of other players, will broaden the service proposition.”

DIY chain Do It All has recently shot a series of TV commercials to appear later this year which emphasises the pride the company has in its products, rather than how cheap they are. The tagline for the ads, produced by TBWA GGT Simons Palmer, is: “Love where you live.”

However, one account director, who handles ads for a rival furniture store, says: “Retailers’ imperative is to drive traffic through stores. Branding is a secondary factor. Trading in the non-grocery sector is going through a tough time. Retailers’ experiments in branding will soon be rolled back.”

MFI led the way in becoming an out-of-town retailer 20 years ago. The challenge is to change and sell smaller products in bigger stores.

Sources say MFI has no intention of changing its price-driven advertising and move towards branding, so maybe it does not need a marketing director after all.

Chairman Derek Hirst says the aim is to improve margins, reduce costs and concentrate on market leadership in kitchens and bedrooms. He says MFI will increase its market share through “targeted advertising, additional brand support, new development, with improved focus on service in sales and distribution”.

It is hard to see how it will achieve all this without a marketing department.

Latest from Marketing Week


Access Marketing Week’s wealth of insight, analysis and opinion that will help you do your job better.

Register and receive the best content from the only UK title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work. The more we know about our visitors, the better and more relevant content we can provide for them. And, yes, knowing our audience better helps us find commercial partners too. Don't worry, we won't share your information with other parties, unless you give us permission to do so.

Register now


Our award winning editorial team (PPA Digital Brand of the Year) ask the big questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.


From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we are your guide.


Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Having problems?

Contact us on +44 (0)20 7292 3703 or email

If you are looking for our Jobs site, please click here