Despite 40 years’ experience Mothercare is failing to nurture a loyal customer base, giving rivals the chance to steal a march with more modern and fashionable offerings.
Last week Mothercare announced its fourth profits warning in a year, pushing its share price down to a year-low of 86.5p, with at least one industry observer claiming that the strong brand name was the only factor stopping it falling even further. For the 52 weeks ending March 30, 2002, sales were &£426.9m, up from the previous year’s &£419m. But pre-tax profits of &£4.2m were down from &£10m the previous year.
Following the profit warning, analysts slashed their full-year expectations to a pre-tax loss of &£12m.
Mothercare has been plagued by stock control and distribution problems following a move to a warehouse in Daventry that is more suited to clothing than its product mix, which ranges from clothes and toys to durables and nursery hardware. But industry figures claim that Mothercare’s problems are more deep-rooted.
Lambie-Nairn executive creative director Gary Holt says: “I think the brand is suffering. The biggest problem the management faces with the brand is that it doesn’t stand for anything relevant in today’s market.”
Mothercare’s product offering and scale is unique – selling clothing for babies and children up to five years, maternity wear, nursery products and toys all under one roof. But that has not been enough to safeguard its position across a number of increasingly competitive markets.
In clothing it is being squeezed by the middle to top end of the market, with rivals Baby Gap, Next and Adams satisfying the trend for mothers to dress their offspring in labels and fashionable items. Meanwhile the likes of Ethel Austin, Matalan, Primark and the supermarkets offer value.
Similarly in relation to toys it is up against the Early Learning Centre at one end and Toys R Us at the other. While Mothercare may dominate the UK nursery hardware market – with a 47 per cent share in 2000 worth &£200m (Mintel) – it cannot relax. Rivals such as John Lewis have carved out a reputation for delivering advice and competitively priced products, encroaching on Mothercare’s “expertise”.
Even when Mothercare has managed to persuade young mums to stock up on the essentials, such as cots and prams, it has failed to provide them with a reason to return to its stores once the baby has arrived.
One industry insider says that loyalty is an issue for Mothercare: “The problem is keeping customers, because the second time around there is no need to go there. Mothercare clothing has a mark of ‘naffness’, and its character merchandising is out of date.”
Miles Perkins implementation director at FutureBrand agrees: “Due to its positioning, Mothercare should be ahead of the rest of the high street when in fact it is behind. It has to find a way to be relevant, fun and fashionable.”
Even rivals such as Boots, which launched its own label – Mini Mode – last week in a joint venture with Adams, are recognising the need to provide fashionable clothing.
Expenditure on childrenswear has grown steadily in the UK, up from &£4.5bn in 1995 to an estimated &£5.9bn in 2001, according to Mintel. This has been fuelled by a more affluent society adopting a disposable, fashion-conscious attitude towards clothing.
In December, Ben Gordon was appointed as Mothercare chief executive, bringing with him experience of running Disney Stores across Europe and Asia. Product is one area he is assessing, along with distribution, sourcing, product mix, the store portfolio and customer service.
Steve Carrigan managing director at AMV Advance, the agency which handles Mothercare, says it has advised that store interiors, merchandising and service need to be overhauled before the retailer can return to above-the-line advertising in a big way. AMV Advance has instead devised the line “Because little things matter” to be used in store.
Gordon has also to decide whether a much-needed new look for Mothercare, on trial in Hammersmith, will be rolled out across all its high street stores. Displays combine products with signs asking questions in an attempt to illustrate expertise and to let shoppers feel they can ask about issues such as breastfeeding. A changing room next to the maternity section has also been introduced, as well as a baby changing room and a catalogue hub with order slips.
But others suggest that Mothercare needs to do more in order to distinguish itself from rivals.
Verdict analyst Richard Hyman believes the store, often the first choice of mums-to-be, fails to live up to consumer expectations due to a lack of informed advice from staff: “There’s an enormous need for that knowledge and with the economics of today a lot of people with that knowledge are desperate for work.”
Unless Gordon can turn around Mothercare the chain may become the subject of a takeover bid. Adams, an aggressive rival, has already been linked with the retailer and any acquisition would take it into the nursery market. Adams’ opportunity may become a necessity if Sir Peter Davis, in his bid to boost Sainsbury’s non-food offer, decides to axe Adams concessions in favour of Sainsbury’s own products.
With a declining birth rate, it is even more of an imperative for Mothercare to find a solution that will carry it through the next decade or so.