It’s July, which means that another quarter of retail data is in and, as regular as a battered old clock that you should have thrown out years ago but couldn’t quite bring yourself to dispose of, Marks & Spencer (M&S) is once again announcing another set of “disappointing” numbers.
Despite its central location on almost every British high street, M&S is a very strange beast in that it runs two entirely different businesses from within its four walls. There is the clothing and homeware business, which traditionally accounts for more of the profits and has been in an almost continual slump for the past decade. Then there is the usually stellar food business, which has performed much better than clothing in recent times and which the new management team headed by CEO Steve Rowe now intend to focus on with even greater acuity.
Investors were spooked this week because both businesses went backwards between April and June of this year. Like-for-like sales of clothing and home revenue fell 1.2% while food sales dropped 0.1%. That tiny slip in food sales may not sound much, but other grocery retailers reported increases for the quarter and food is the one consistent strength of the M&S numbers. No surprise then that the M&S share price is down 6% so far this week.
All of this should sound very familiar. Ever since the financial crash, when M&S took an enormous hit, the company has never managed to reassert itself as the force it once was. Every quarter its results have been just a little bit worse. Every quarter its management have put a positive spin on its lacklustre performance. Every quarter a few naïve journalists have written the ‘M&S is about to turn the corner’ story. Repeat to fade.
And fade is the right word because this is not a sudden Nokia-style implosion that we are witnessing. It’s the almost imperceptible slide of what was once the greatest brand in Britain into irrelevance and eventual extinction. At this point, around about paragraph five, it’s traditional that I criticise the management team at M&S for being shit and lay out a highly specious, over-simplistic remedy for everything that ails the brand in question.
But such comments would be unfair to Rowe and the team of retailers he leads at their Paddington HQ. It would also be unfair to the teams that preceded him under former CEOs Sir Stuart Rose and Marc Bolland. The fairer, but much more depressing, reality for M&S is that it now faces structural challenges beyond even the finest management and marketing techniques. If anything, the current executives deserve credit for managing to keep M&S as relevant and robust as it currently is given the significant strategic headwinds they have faced in the last decade.
Brand equity v brand management
To understand why I am so supportive yet so pessimistic about M&S, you must first grasp a crucial distinction between two of the biggest brand concepts that are usually, and entirely incorrectly, conjoined together. When I do a bit of brand consulting I always find it useful to divide my pages of notes into two halves. One set of pages says brand equity, the others say brand management.
Brand equity is the natural resource you have at your disposal at the brand in question. Here we look at the all-important brand awareness and then the more complex, slippery issue of brand image. For those aware of the brand what do they associate with it? Do they see it as a faded icon? Do they question its quality? Do they believe it’s the ultimate in urban refinement? What, in a nutshell, do they think of the brand?
Brand management is an entirely different proposition. If brand equity represents what the brand has, brand management signals the manner in which it has been run in recent years. Does the team in charge of the brand operate with decent tracking metrics? Are they clear on brand position? Do they have a viable set of strategic objectives?
That middle position that M&S enjoyed for so long has become an increasingly unpleasant place to inhabit.
The great branding professor Kevin Keller once wrote a wonderful checklist for the Harvard Business Review called the ‘brand report card’ to ascertain not the strength of the brand but the quality of the team in charge of it. The report card remains the acid test for any brand manager.
The two concepts of brand equity and brand management are distinct but obviously connected. Over time a great brand run by a poor team will flounder and the brand equity will fade. Similarly, a brand with distinct weaknesses in its brand equity will re-emerge and strengthen under the influence of good brand management. The intervening variable is always time.
No doubt the brand management exhibited over the past decade at M&S could have been better but in reality Rose, Bolland and Rowe have all played a very good game – the kind of game that, applied to a brand with more potential, would have seen significant results by now.
The problem for M&S is its brand equity. It is a brand that is founded on a vision of aspirational value and quality that was incredibly pertinent for the 20th century. As the British middle class emerged from the working classes they sought a higher level of product and service at an accessible price point and M&S was there to lead the way. What made M&S’s St Michael own-brand so powerful was its ability to find a magical equilibrium between quality and value. Never too much quality so the brand became above itself. Never too much value so it lost its way into discount territory.
But as the UK has progressed through the early 21st century those are the exact things that British consumers are looking for. Consumers sometimes look to trade up for little high-end luxuries they cannot always afford. That same consumer pays for those luxuries with the gigantic value offered by low-end mass retailers. Consequently, that middle position that M&S enjoyed for so long has become an increasingly unpleasant place to inhabit.
Underneath it you find fast fashion chains like Zara and H&M and super-competitive supermarkets like Tesco and Aldi. Above it are accessible luxury players like Coach and Michael Kors and high-end grocery brands like Waitrose and Selfridges. What was once an ideal beachhead to win over a wide swathe of the British buying public has become an ever-decreasing island in an ocean of societal change and cut-throat competition.
The end is nigh for M&S
What makes this rather unedifying position all the worse is what will happen next. The British people have decided to leave the EU and, as that protracted period of separation occurs and is followed by the economic isolation that results, there is a very great chance that the UK enters a significant period of economic decline. That’s bad news for everyone but it’s especially worrying for M&S.
When times are tough there is a race to the bottom for consumers who become intent on saving money. Aldi, Lidl and anyone else with a discount sticker in the window will win. The only consumers immune to all this are the kind of consumers with enough money to buy high-end and stay high-end regardless of what happens to the economy – but they never shopped at M&S in the first place. The brands at the high and low ends of the market ably survive the recession; the ones in the middle struggle massively.
M&S is the literal middle of everything. It emerged from the middle of the country, as a Jewish peddler travelled the cities of England selling his wares. It became a retailer that took a prime spot in the middle of every high street, and became the epicentre for middle-class shoppers intent on living just a little bit better. It priced itself in the middle. It offered a middle level of quality above the traditional fare but below high-end, exclusive products. It even established its sales associates as somehow between the standard shop girls that populated stores in the mid-20th century and the snooty sales people of the high-end department stores.
But the middle is no place to be anymore. Sliced and diced by more focused rivals. Buffeted by the imminent storm of Brexit and all that it will mean for British disposable income. Increasingly out of place in a very different retail environment in which Amazon and eBay take control. M&S is being managed well but there is no hope for the brand in the long term. No hope at all.
It will not disappear overnight. It remains a relatively profitable retailer and can look forward to many years of continued trade. But M&S will see its sales slump by a few percentage points each year as ageing consumers, who lived their life in M&S jumpers eating St Michael meals, head off to the great supermarket in the sky.
It will be a victim not of bad brand management but of the unfortunate reality that no brand will live forever, and some reach the end of their lifetime long before others. Not because of brand management or some major strategic error, but rather because the things that made this brand so wonderful and vital to a young mum in the 1970s make it entirely unattractive to her granddaughter 30 years later.