Mark Ritson: This is not just a decline, this is an M&S decline
As M&S sales fall again, its problems are not brand management but brand equity, and a mid-market positioning that is inevitably fatal in a tough consumer economy.
By Mark Ritson
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.
READ MORE: M&S – Stop trying to understand customers through the lens of the brand
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.
READ MORE: Consumer confidence ‘stuck in the doldrums’
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.
- Professor Mark Ritson will be teaching the next class on the Marketing Week Mini MBA in Marketing from September 2017. To find out how it could make you a more confident, more effective and more inspired marketer, and to book your place, click here.
Much of this analysis is not new, but Mark’s piece is very well put. Commentators a decade ago warned of the dangers for M&S of living in the ‘safe middle’, the focus then primarily being on the unresponsive and unimaginative nature of their buying policies, and the ‘staid’ nature of their clothes offering. Then it was Gap, Next, etc. that offered excitement that met contemporary shopper expectations in a way that the dependable M&S brand couldn’t muster.
Buying policies are not covered above but the disconnect between M&S buyers and manufacturers is a relatively recent development, and one for which management perhaps should be held accountable. Many people in the textiles sector have stories of how engaged M&S buyers used to be with the suppliers, regularly visiting and developing deep relations with factories up and down the country; those same people now expect M&S to disappear as a clothing brand within 5 years.
Perhaps the leadership had no option but to source clothing from the same factories as Zara, Matalan, etc. but as every M&S shopper above 50 will tell you, quality has been in decline for over a decade. The middle ground was anyway an increasingly unpleasant place to be, but in conceding a reputation for decent quality, M&S ensured they lost that solid segment of their customer base, as well as the style-conscious.
I agree with Emerson’s comments regarding M&S manufacturing. M&S were the go to supplier for school clothes and a size was a size. Since the off-shoring quality dropped drastically. I stopped being a regular customer when I had to take back my daughter’s school skirt twice due to poor manufacture. My female friends tell me that there is a real lack of size consistency, they usually try on several of the same size to get a reasonable fit. (on the plus side, I am told that sometimes a 10 on the ‘large end’ is just the same as a ‘low end’ 12) It used to be my store for work clothes, not any more.
If there is a root cause, I suspect it was the demands of the City for M&S to make an ‘expected’ return and, probably, a lack of serious female input into strategy.
Whilst no brand has an absolute right to exist, it’s always sad to see brand equity frittered away.
Mark,
I agree with most of your observations, but not your assertion that M&S is in the ‘middle’ with regard to its food offering. Waitrose may aspire to higher ground, but the evidence I’ve seen from multiple research studies I’ve conducted in recent years is that most consumers still regard M&S as the ‘gold standard’ on food, particularly in ready meals. Selfridges isn’t even on the map – it’s just for a very few rich, over-indulged Londoners (and the odd marketing professor…?)
I’d expect the food side of the M&S business to be a good deal more robust and enduring than the clothing, even though their brand equity in this area is only really 30 years old
That’s interesting and sounds like it’s evidence-based. My own experience is that it’s still my in-laws (in their 70s) who like to buy M&S food because they think it makes them look posh. I won’t touch it because I don’t see evidence of their environmental or social policies or anything that tells me it’s a superior product (sure, you’ve peeled and sliced the carrots for me). I shop at Aldi for parsimonious reasons and Waitrose because their policies were put in place before it was trendy to care about the fisheries or farmers or environment. This longevity of the policies tells me they genuinely give a crap. I believe that is where Waitrose has carved out its brand position and appealed to those “middle-class shoppers”. The brand Waitrose tells me that they aren’t looking for a weasel way of being able to put a union flag on the front of a pack of sausage to con me into thinking it was farmed in the UK on some beautiful Kentish farm. Of course, there are still people who shop there because they think it makes them look special.
There was this mood at the time with my friends, that we all really wanted a great British Classic, M&S, to work. We were passionate about M&S. But everything M&S did in clothing (apart from food) was not what we wanted. M&S consulted the wrong people, or focus group, or internal groupthink where everyone’s idea is bland, safe and no one loses their job for such a bold idea as just producing classics we can rely on. Dependable quality classics (like well cut, high quality white work shirts). Instead they gave us polyester, older lady cut pants (and the shop are full of older ladies, not mixed ages), socks for our boyfriends that got a hole in them after 4 wears and teenage boy clothing for super thin young women. Now the food. M&S (along with many other dying brands) were slow to the game of meat-free & dairy free food, which is what we want, because there is not enough to choose from when we want a break from meat & dairy. Instead it’s been mostly meat, more meat, cheese and cheese. Where are their massive ranges of well developed, hearty, plant-based ready meals and sandwiches (please don’t give us just salad-y products, where’s the coconut cheeses?) ie like Tesco & Sainsbury’s direction? Nowdays, my friends don’t even mention our woes with M&S, they don’t go there and don’t care, like it’s a brand that is already forgotten.
Food is top-rate at M&S, not in the middle.
I agree with the comment from Chris Blythe above. Some M&S products, such as fresh bread, are simply better then other UK supermarkets. You’re right about everything else.
Being a brand in the middle is never good place to be for any brands (not just retail), the just ‘enough’ quality for just what you ‘can’ pay positioning has eroded across categories – in recession consumers down-trade while in good time they up-trade, brands in the middle loose out both way. Also being in the middle really limits the positioning maneuverability available to a brand. Just look at handphone- people aspire and want to buy Apple and Samsung, while brands like LG, HTC which sit in the middle slowly struggle and fade.
In the US, the “third path” is that being walked by Costco. A warehouse discounter that has developed a fiercely loyal “membership” because it features limited selection, bulk quantities, but higher quality merchandise and food than one finds at Walmart (or Walmart’s warehouse brand, Sam’s Club.) Costco is leading with both price and quality, and doing so by leveraging a warehouse buying experience coupled with limited and larger quantity sku’s. Their fresh produce and meat departments are legendary for high quality, as is their “store brand” product line under the Kirkland brand. An example is their annual Kirkland Signature Organic Extra Virgin Olive Oil, despite the need to manage through the Italian olive oil fraud scandal which they weathered with flying colors. Rather than muddling through the middle, or choosing either very high quality or value pricing, Costco has chosen a “both / and” strategy that’s a hit with a very loyal clientele.