If the Marks and Spencer board is feeling depressed ahead of the dire interim results it is expected to post next week (Tuesday, November 9), at least it can draw some comfort from the huge goodwill customers continue to feel towards the group’s food offer.
A survey carried out by HI Europe exclusively for The Grocer reveals that 70% of M&S shoppers believe it offers better quality than other retailers.
HI Europe senior researcher Caroline North says: “It is the quality of M&S that is drawing shoppers there. It continues to define M&S - and while people do not feel that it offers a wide range of items, it does offer the items that they are happy to recommend to friends and colleagues.”
However, as the survey shows, range and convenience are still bugbears and the challenge for M&S now is how to exploit that goodwill and the strong brand equity that underpins it to halt the decline in sales.
After admitting in September that its standalone food stores were performing better than its main department store foodhalls, the retailer put out a trading update last month showing a 2.8% fall in like-for-like food sales in the 12 weeks to October 2 - down 0.7 points on the same period last year.
Opinion is sharply divided in the City over why sales are on the slide and what the retailer should do to reverse the trend.
CSFB analyst Tony Shiret argues: “The decline is pretty disastrous though not that big a surprise given that they’d taken out 12% of their SKUs. It was a ridiculous decision.”
He is highly critical of the Simply Food format. “It’s a disaster and is likely to be closed. The product range lacks authority and there are high fixed and semi-fixed costs: there’s a lot of refrigeration, a lot of staff and not very many customers.”
The push to improve availability across the business begun under Justin King might have achieved its goal, he says, but it is also likely to have increased the number of markdowns. “The extent to which it has driven true sales growth is a big debating point,” he says. He also questions its attempts to squeeze suppliers by asking for discounts on invoice prices, arguing there is a danger that, as in non-food, history will repeat itself and M&S will be forced to compromise on the quality and sourcing of its products.
“I think that they need to stabilise the personnel situation across the food business and develop a strategy,” he concludes. “At the moment, I don’t think they have one.” Other analysts agree that M&S has struggled to compete with its multiple rivals on convenience or price - an observation borne out by the survey findings, says North. “Convenience is a key concern: a third of consumers found M&S less convenient to use than other supermarket chains. This is especially a concern as for the majority of its consumers, top-up and lunchtime shopping is what they are mainly using M&S for,” she says. “This style of shopping has its success routed in offering a convenient experience to the shopper -- something M&S needs to concentrate on.”
There is also a consensus that food sales are likely to have been adversely affected by the disastrous performance of clothing.
But many dispute the suggestion that Simply Food is a non-runner. If anything, suggests Jonathan Pitkänen at Fitch Ratings, the emphasis on the standalone offer should be increased. “The food offer is still excellent. By focusing on Simply Food, availability wouldn’t be such an issue because there’s not such a broad spectrum of lines and profitability should be better.”
The emphasis on Simply Food should be increased rather than reduced, he adds, “because it continues to be a driver for them”. The general problem with M&S food is that consumers do not have enough choice, he says. “I think they should increase the offer and take space out of clothing.”
Improving product innovation and availability should be further priorities, says Seymour Pierce analyst Richard Ratner, who remains optimistic that M&S will rise to the challenge. “Stuart Rose’s expertise was in food, so I expect he’ll get the right person in.”
Whoever that is, and an announcement is expected soon, they will have a tough job to turn around a business that one supplier describes as “too insular, too slow-moving and not clear enough on its core range”.
As the survey shows, it is not enough to bank on the huge level of goodwill towards the brand. “The increased prevalence of the convenience shop on the high street and increasingly wide ranges of premium lines such as Tesco’s Finest and Sainsbury’s Taste the Difference are eroding M&S’s share of this market,” says North. “With 71% of consumers saying M&S offers better quality than other retailers, perhaps it is time they capitalised on the quality, improved the convenience and welcomed the consumer back into their shops. Quality alone can no longer be its unique selling point.”
The attitudes of shoppers towards M&S
>>high marks for quality and taste but on value for money, health and range it is struggling