The British appetite for fine foods from Marks & Spencer may be on a serious decline and its crown as the UK’s biggest clothing retailer by volume under threat from value fashion giant Primark, but M&S refuses to accept defeat. To lure customers back to its stores, M&S is to start selling gas and electricity with the promise of store vouchers (MW last week).
Though it comes weeks after executive chairman Sir Stuart Rose took the City by surprise by announcing its quarterly sales since the beginning of 2005, M&S Energy is being viewed as a move in the “right direction”.
“Buying M&S gas is like buying into this ethos of something special and therefore makes a lot of sense,” says Mintel retail analyst Richard Perks.
“M&S has been trying to stretch the brand outside its core food and clothing, and the launch of M&S Energy does not seem such a huge risk. It is entering this market with a trusted partner, rather than a utility company tainted with bad press and publicity,” says Mike Godliman, a retail analyst with Pragma Consulting.
M&S Energy, in partnership with Scottish & Southern Energy, will be launched initially through 16 stores and mandsenergy.com on October 27. It will then be extended nationwide by the end of November, as part of its Homes division, which also sells furniture, and M&S Direct.
The energy offer is part of its push to start selling a wider range of goods and services and expand into new areas, just like Tesco, say experts. M&S already sells a range of electrical goods and is trialling branded foods in some of its stores.
Making the most of the timing
“The timing of the launch is a bit unfortunate. But with the increase in energy bills, there is a lot of switching already happening and a trusted and reliable brand such as M&S could do quite well out of that,” says Godliman.
Perks adds that if Tesco has successfully managed to leverage its brand outside its core grocery area, there is no reason why M&S cannot replicate the same. Rival Sainsbury’s tried selling gas and electricity five years ago, but has since stopped. Retail experts, however, say that Sainsbury’s needs to continue to “focus on basics” as investors have been fretting about a flight to rivals in a recession despite its recent strong sales growth.
“M&S Energy however is not a great leap away from its credit card business, and fits well into its strategy to build M&S as a commodity brand,” says Godliman pointing to the success of M&S Money, which was launched in 1985 and is among the top ten credit card providers and the second-largest travel money retailer. According to an M&S spokeswoman, it has over 4 million customers. Currently owned by HSBC, it continues to operate under the M&S brand.
One observer says that M&S Energy could fit well into the retailer’s Plan A sustainability campaign and has the “feel of being green and ethical.” M&S is however keen to distance itself from any green claims when selling energy. “It is not part of Plan A strategy, and we know it’s difficult to secure green energy. This launch is about growing and stretching M&S Home products,” says a spokeswoman.
No big ad campaigns are planned for M&S Energy, but the retailer is hoping this new launch might just chime with the mood of these tough times. As Rose said when announcing the latest dismal results/ “…the less core customers have migrated away from us and we’ve got to find ways of getting them back in.”