M&S ‘change tsar’ must address virtual threat

M&S’ sale of some of its property underlines the threat of online retailing to the high street. Its new ‘change tsar’ will have the issue high on his agenda.

When Marks & Spencer announced a couple of weeks ago that it had appointed a “change tsar”, I was reminded of the hapless ministerial career of Frank Field MP in the early stages of this Government. Field was commissioned as social security minister “to think the unthinkable”.

As things have turned out – and as Michael Cockerell’s excellent BBC documentary on the first 1,000 days of the administration illustrates – it is unthinkable for any minister to think anything other than what Tony Blair thinks. It was unthinkable, therefore, that Field should not be sacked.

Nigel Robertson is leading the change at M&S, with a “licence to challenge and sanction at all levels, including the plc board”. Field will know how he feels. With Luc Vandevelde joining from Promodès as M&S’ new executive chairman – for which read prime minister in New Labour’s world – the job looks less like thinking the unthinkable than like thinking what the boss thinks.

This is especially so since the post was created just five days after the announcement of Vandevelde’s appointment and it is unclear whether it has his sanction. Another appointment made alongside Robertson’s – that of Kim Winser as head of corporate marketing, responsible for the “custodianship of the M&S brand” – was short-lived. Winser evidently decided not to sustain the unsustainable and has quit to become chief executive of knitwear group Pringle.

One of the first tasks facing M&S’ change tsar, apart from appointing a new head of corporate marketing, must be to address the way in which the company manages its property portfolio. This goes right to the heart of what M&S is. Indeed, it goes right to the heart of what the high street is.

M&S is unusual among high-street retailers in that it owns the freehold of most of its stores. This has been one little ray of light in the gathering gloom shrouding M&S’ operations. With retail rents at all-time highs and property prices booming, it is one competitive blessing worth counting. And, as if to prove it, M&S is nearing the sale of The Gyle shopping centre in Edinburgh for a tidy £70m profit over two years.

The bigger question is whether there is a future for the high street to be competitive in. M&S almost raises this question for itself by acknowledging that The Gyle is a contribution to the strategy of selling non-core assets. A shopping centre in a major capital city is not considered a core activity for M&S.

This must be partly symptomatic of the erosion of high-street hegemony by online trading. Some maintain that the Internet is replacing the high street with its virtual shopping malls in the comfort of your own home. This is countered by those who argue that you can’t try on a virtual shirt, sample a virtual fragrance or eat a virtual meal.

Supporters of the shiny bright future of Internet retailing come back with the view that online shopping will shift the nature of business from bricks and mortar to “clicks and mortar”. In this model, retailing shifts from properties in the high street to out-of-town storage and distribution depots.

I’m not sure where M&S fits into all this. On the one hand, it has large town-centre sites, on which it doesn’t have to pay exorbitant rents, where the shopper can enjoy the traditional, twentieth-century shopping experience. On the other hand, its ranges are eminently browsable online and it hardly depends for image purposes on the kudos of premium premises.

These are issues which the change tsar must address. And I’m sure he will. The management of change at an institution such as M&S is a complex and opaque process, and you don’t make many mistakes and survive. In other retail activities, the demands of change management may be rather more obvious.

One such activity is financial services. This sector is ideally suited to the Internet, where you can browse over documentation, which is probably better presented and certainly more comprehensive. The Internet also allows you not to deal with financial salespeople in person – even queries can be answered in writing online.

With this in mind, it is remarkable that Royal Bank of Scotland, which this week is mopping up after its successful contested battle for NatWest, should have decided not to close any of its branches. Last week, Lloyds TSB announced that it will close 400 branches and cut 3,000 jobs to compete with Internet operations. Others will follow. The long-term trend for the retail banking industry has been relentless movement away from branch networks.

NatWest chairman Sir David Rowland and chief operating officer Ron Sandler aren’t career bankers and are unlikely to hang around. Fired chief executive Derek Wanless still has a consultancy arrangement with NatWest, but is probably too associated with the mistakes of the past to be of much help.

The merged bank will be run by Fred Goodwin under RBS chief executive Sir George Mathewson. Their greatest challenge is the high-street network they have now acquired. M&S may need its change tsar. But RBS needs one more.v

George Pitcher is a partner of issue management consultancy Luther Pendragon.

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