Case 1 ‘Relighting the spark’- Can Marks & Spencer turn things around?

T imes have changed for Marks & Spencer (M&S). Once the icon of British retailing and darling of the stock market, it could do no wrong. However, the retail giant has been facing enormous difficulties since the 1990s: falling sales, falling share price, disgruntled workers, countless management reshuffles, retrenchment of foreign expansion, investor discontent, stagnant and, in some cases, declining growth. This downward spiral began to be felt in 1998, when M&S failed to keep pace with leaner and meaner competitors, and the changing needs of the market. What has changed in such a short time?

Marks & Spencer was formed in 1894, when Michael Marks formed a partnership with Tom Spencer. From these humble beginnings, M&S has become one of the UK's leading retailers of clothing, food, homeware and financial services, with over 300 UK stores.

Marks & Spencer's reputation was built on the provision of high-quality products, which were reasonably stylish yet keenly priced, and the provision of excellent customer service. The main problem for M&S has been its clothing division, which accounts for over 45 per cent of the company's revenues, of which 60 per cent is women's, 30 per cent men's and 10 per cent children's wear, yet its sales growth is falling rapidly. Many commentators feel that the main problem for the group is that M&S tries to 'be all things to all customers', which they believe is impossible and creates a confusing brand image among consumers. In recent years, M&S has found itself adrift in the clothing sector; it was priced out at the lower end by fashion discounters, and more fashion-conscious consumers have defected to specialty retailers such Gap, Zara or Next. According to some analysts, the target customers for M&S's clothing and food businesses are not the same at all, with the food department attracting a more trend-setting, upmarket customer, compared to the c ustomers who shop in its clothing division.

A new management team has been put in place to try to stem the decline of M&S. The new chairman, a Belgian, Luc Vandevelde, couldn't be more blunt, promising to reverse M&S's flagging sales and falling profits by 2002 or else resign. Vandevelde was recruited from France's No. 2 retailer, Promodes, and given the task of turning around and re-inventing this British retailing giant. However, he recently admitted that the turnaround will take longer than anticipated. Now he wants to modernize M&S's staid brand image to attract younger, more fashionable consumers without alienating its core middle-aged customer base.

Some reasons attributed to the decrease in demand for M&S's clothing lines include the following.

• Rapidly changing customer needs. Consumers are more demanding, seeking more fashionable goods, which have a good quality of design and are value for money. M&S is seen as having lost its trend-setting image for its clothing lines due to complacency and its failure to adapt to changing needs. Customers viewed its clothing range as very traditional and stuffy due to the designs and the unexciting retail design layouts. This has led to erosion of its reputable image among a once extremely loyal customer base.

• Confusing positioning in the minds of consumers. Other retailers occupy a succinct and well-defined brand position, unlike M&S.

• Fierce competition in the fashion retailing market for the fashion-conscious consumer, with new entrants (such as Hennes & Mauritz, Gap and Zara), and expansion from existing players (such as Next and River Island). The Dutch-owned C&A, a former industry stalwart, surrendered the battle by shutting all of its UK outlets as a reaction to falling sales.

• Increased competition from value retailers (such as Matalan and Primark), which focus on providing fashionable, good-quality clothing at very low prices sourced from overseas.

So, what has M&S done to adjust to these market challenges?

First, a new management team has been recruited to give the store a fresh impetus. Vandevelde introduced a new management team to the group, with some M&S veterans taking retirement. Furthermore, M&S has hired new design chiefs such as George Davies, the founder of Next and former designer of the highly successful George label for supermarket chain Asda. M&S hopes that he can repeat this success. For the first time ever, the chain launched a national television advertising campaign in the UK. This reversed a long-standing policy of 'no advertising' with a US$28-million campaign featuring a nude female model. The ad featured a size 16 model running up a hill, stripping off her clothes and then yelling 'I'm normal', the ad finishing with advertising copy of M&S: 'Exclusively for Everyone'. The chain has retrenched its aspirations of global expansion, with the closure of 38 of its continental stores, cutting 4000 jobs, and the sale of the US-based Brooks Brothers and Kings Supermarkets. These announcements caused much furore with workers carrying out public protests at the closures.

The group is now focusing on its domestic operations. An upscale clothing label-Autograph-was created by top-name British designers. The group is continuing its store refurbishment programme, spending US$84 million to redesign 21 stores. This, hopefully, will re-invigorate the brand's image as a modern retailer and excite shoppers. M&S has closed its UK-based catalogue business. The chain is continually innovating its food division by launching new food products such as the low-fat Count on Us range, the To Go takeaway range, and through its continued emphasis on organic food products. It has also announced e-commerce initiatives, creating partnerships with the Microsoft Network and the BBC to sell merchandise online. More focus has been given to building on the successes of the chain's food and financial services divisions. Marks & Spencer has introduced loyalty cards for the first time. Furthermore the group is trying to overhaul its brand name by hiring consultants Interbrand to modernize its brand image. Some of the changes made have included the downgrading of M&S's own-brand label, St Michael, and scrapping its distinctive green shopping bags for those of a lighter shade of green. But will changing colour to a lighter hue actually kickstart a turnaround in the fortunes of Marks & Spencer, and will these strategies make a difference?