Marks & Spencer: great food, bad clothes

Sales are up, but clothing needs a rethink.

With total UK sales up by 2.6 per cent, the headline on today’s M&S results is that the company has delivered the strongest quarterly trading growth in two years. While this is true, such a statement belies a whole host of underlying issues; many of which are, as of yet, unresolved.

Despite the solid overall growth, there is a strong sense of déjà vu in the latest set of numbers: the polarised performance of falling clothing sales and rising food sales continues and seems to have become somewhat entrenched. Indeed, the polarisation is even sharper this quarter given the particularly robust uplift in food sales – an uplift which has saved M&S the embarrassment of a weaker set of trading results.

That this pattern has repeated itself over a relatively long period of time raises two critical questions: can the negative trend in clothing be reversed and, if so, what does M&S need to do to reverse it?

On the first point, it is almost impossible that M&S will ever go back to the pre-1998 heydays when its clothing market share was at its zenith. The market has changed too fundamentally since that time and the more fragmented landscape makes it impossible for a player of M&S’s configuration to take the share it once did. However, that does not mean to say that M&S’s market share could not be bigger and it certainly does not mean that M&S should accept recent declines in share as being inevitable. It has the potential to do much better; whether it has the will is another matter.

The fundamental problem with M&S is that it still thinks and behaves like a middle market clothing retailer of yesteryear. Many attempts have been made to shift this attitude and it would be unfair not to recognise that some progress has been made. However, old habits die hard and M&S’s middle market DNA still shows through in so many ways, especially on the product front.

There are two critical issues with product. The first is that there is a lack of targeting and empathy with core customers, which means that the offer is frequently not one that is seen as being "must have" – something that is now critical in clothing. The second problem relates to product merchandising. Although M&S’s newer stores are a significant improvement over what came before them, there is still a feel of drowning in a ‘sea of product’ which makes it hard for consumers to pick out key trends and styles. This method of merchandising continues to be out of step with the more segmented way in which many competitors present their offers and means that M&S often lacks the ‘"exclusivity" or "excitement" of rivals.

A further issue is M&S’s focus on the"value" part of its range, which we believe is too great and is an underlying symptom of a relatively weak offer and lack of confidence in clothing. While the market is undeniably more price sensitive, the key issue for consumers is value for money rather than just low prices. In the case of M&S, this is about adding value and interest to clothing ranges so that customers are willing to pay more. This, and not a focus on price, needs to be the direction of travel going forward.

With demand in a lacklustre state, the above would be enough of a problem if competition was static; however, other players have been aggressive both in expanding and in developing their ranges and propositions. In light of this, M&S seems to have been increasingly left behind. A prime example is John Lewis which has a strong customer overlap with M&S: the reinvigoration of its fashion offer might not have contributed much to M&S’s declining clothing share, but it – along with many other players – will have certainly nibbled away at it. Next has also improved its fashion credentials, as has Debenhams through its own brand offers; meanwhile, Primark continues to lead on price. Collectively, all of these players – and more – are putting the squeeze on M&S.

Interestingly, the food business provides a template for how M&S should approach clothing. Here M&S is unashamedly directional; it does not try to be all things to all men. The stance, while recognising the need to provide good value for money, is strongly skewed towards the premium end of the market. Brand segmentation is clear and innovation ensures that various parts of the range are regularly refreshed. All of this is supported by a marketing effort that creates customer interest and genuinely reflects the strengths of the proposition. All of these factors have contributed to an impressive market beating performance over the last quarter.

Overall, despite the lacklustre results, M&S remains a solid player and has significant potential. There are plans in place to remedy some of the issues inherent within the business, but the remainder of 2013 will need to be a year of delivery and action if the company is to turnaround its fortunes.

Photograph: Getty Images

 Managing Director of Conlumino

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.