Marks and Spencer story spans 125 years. M&S made a reputation on a policy of selling only British-made goods (eventually discontinued in 2002). By 1984, when the company Marks & Spencer (M&S) celebrated its centenary, annual turnover was more than £2.8bn. However in the late 1990s it suffered a reversal in its fortunes.
This case was presented skillfully at Tasmac and many lessons were highlighted by the talented group below.
Polish-born refugee from Russia, Michael Marks, set up a market stall in Leeds selling everything under the admirably
simple slogan: ‘Don’t ask the price. It’s a penny’. Michael Marks became well known for pioneering ‘penny bazaars’ in late 1980s. His business grew rapidly and he decided to partner Thomas Spencer, a cashier from Yorkshire.
After his father Simon Marks took over the running of M&S. He was aggressive with his ideas for the organization and even went to America to study the retail stores. He introduced the ‘St Michael’ logo as a sign of quality and trust. There was a feeling of camaraderie and family
within the stores. Its clothes were a byword for affordable quality and its food halls pioneered ready-prepared meals. He used the same UK-based suppliers and ensured the goods were exactly to specifications
The next CEO Sir Richard Greenbury was focused more on classic fashions. And not so much on the cutting edge of fashion. The top-down culture continued. In 1998, under the leadership of the irascible but effective Sir Richard Greenbury, M&S became the first British retailer to clock up annual profits of £1bn.
Then in late 1990s their image became – stodgy, the staff deserted in droves and the shares plummeted – it has long lost its claim to be either Britain’s biggest retailer or its most profitable (both of those titles go to Tesco).
Greenbury, Chairman and CEO, blamed the competitive environment. Competitors were eroding market share, from the top and bottom ends of the retail market. They offered basic range of clothing, but at significantly lowered prices.
In Nov 1998 Greensbury had to step down from the CEO position. A senior director Peter Salsbury was voted-in as the new CEO. Oates his contender did not attend the board meeting and elected to take early retirement.
Salsbury began to implement a reorganization strategy to become more customer focused by moving M&S away from
its bureaucratic culture. Breaking down the power of the traditional buying fiefdom and to adopt a customer focused approach, rather than allowing the purchase department to dictate what the stores should stock.
Salsbury saw the closure of six of M&S’s European stores, a reduction in its head office, and closure of all 38 of its Canadian stores that had operated at a loss for 24 years. New design consultants were appointed to create a new store image.
In 2000 for the first time an outsider Belgian-born Luc Vandevelde was appointed Chairman and given a ‘golden hello’ and a lucrative salary. Vandervelde left his MD role at Promodes, the French food retailer. There he had achieved a six-fold increase in the value of stock. M&S Vandevelde revamped the value chain – earlier stores of the same size were sent the same clothes regardless of location or customer profiles.
In March 2000 M& S declared a dramatic overall to its brand. It downgraded the once acclaimed seemingly its invaluable, St Michael brand, in a move which would have shocked the founders and past CEOs. This was because it was identified that customers were confused about the differences between St Michael and Marks and Spencer’s.
One distinctive brand would operate and St Michael to be relegated to inside clothing labels as a symbol of quality and trust.
A New Vision
M&S launched Plan A in January 2007, setting out 100 commitments to achieve in 5 years. Now Plan A is extended to 180 commitments to achieve by 2015, with the ultimate goal of becoming the world’s most sustainable major retailer.
In 2008 new M&S chairman, Sir Stuart Rose said India and China will be key markets as the largest U.K.
clothing retailer expands overseas. India is “ideally suited to the M&S demographic” and China will be a “viable business” in the next five years.
What issues come out of the M&S saga? Were they ethnocentric and ignored diversity? Slow to change? Not customer focused? Their chances of success in emerging markets? What did they do right?