MARKS & SPENCER

Great Britain often has been called a nation of shopkeepers, and Marks & Spencer (M & S) is undoubtedly the shopkeeping leader. With several hundred stores in the United Kingdom, M & S is its largest retailer, and the Marble Arch store in London is in the Guinness Book of Records as the store that takes in more revenue per square foot than any other in the world.

Soft goods (clothes and household textiles) account for about two thirds of the sales, and it is estimated that M & S has about 16 percent of the retail clothing sales in the United Kingdom. For some specific clothing items, M & S supplies over half the British market. M & S added food lines to its stores and became the largest and most profitable food retailer in Britain.

How has M & S become so dominant in the British market? The operations were begun in 1884 by a Polish immigrant who believed in selling durable merchandise at a moderate price. Since then, this philosophy has endured. M & S has merchandise made to its specifications. Because of its vast buying power, it can get producers to make cost-cutting investments and to compete by offering low prices on merchandise to be sold under M & S's St. Michael trademark. Because M & S is so well known, it has no need for many of the costly marketing expenses that other stores must un­dertake. There is practically no advertising, and stores are decorated austerely. There is very little personal service and no dressing rooms or public bathrooms. Customers receive no sales slips for small purchases, but merchandise is returned easily.

Another practice that has paid off for M & S in its home market has been to appeal to the nationalistic attitudes of its clientele. M & S has pro­moted heavily the fact that about 90 percent of the clothing it sells origi­nates in the United Kingdom. This claim was challenged by the Transport & General Workers Union, and the company admitted in 1989 that the percentage had fallen to 87 percent and would likely fall further as its U.K. sup­pliers move more of their production abroad. M & S has managed to develop an image that is as British as bed and breakfast or fish and chips. Foreign visitors to England usually do not feel that they have sopped up the local atmosphere without a visit to one of the M & S stores. One of the stores has had to put its warning signs to shoplifters in five languages.

M & S has experienced foreseeable barriers to continued growth in the U.K. market. Not the least of the problems has been its high market share. Being already so dominant, M & S would have to add new products or appeal to new market segments to maintain its growth rate. In the late 1970s the company moved into higher-priced clothes by using finer materials for its traditional styles, such as silk blouses and cashmere coats. At the same time, the company hoped to cash in on publicity surrounding the fact that Margaret Thatcher had bought her suits at M & S before becoming prime minister. This initiative was disastrous: The Harrods-type customer did not switch to M & S, and many M & S customers traded down to even cheaper retailers. As a result, M & S dropped its higher-priced lines, but in 1980 M & S unit sales fell for the first time. By the mid-1980s M & S began again to target a more fashion-conscious market, this time with lines that moved away from its traditional styles. Because the merchandise needed for the fashion-conscious market changes rapidly, M & S had to get supplies within one week from the placement of orders instead of allowing up to fourteen weeks, which had been the custom. Although this move offered hope in Britain, an M & S executive summed up the emerging problems by saying, "Because the company is near saturation in the U.K., its growth must be overseas."

The foreign operations of M & S have been slow to achieve success. When Britain joined the EC, management saw an opportunity to expand on the continent because clothing from M & S suppliers could then enter other common market countries without tariffs. Paris and Brussels were selected as the first locations for stores. Before opening stores in 1975 the company sent a team of observers to Paris for 18 months so that product differences could be targeted to the French-speaking customers.

The team found substantial differences. One was in sizes: They noted that "French girls always seem to wear a size less than they need with everything obviously relying on the buttons, while we [English] go for a half size too large." French women wanted skirts that were longer than the English preference. French men wanted single instead of double back vents in their jackets, sweaters in a variety of colors (including pastels), and jackets and slacks rather than suits. None of these men's preferences were the norm in the United Kingdom. All of these differences had implications for the merchandise mix and the establishment of supplies.

In spite of the substantial research on product, the company was not well received initially. Many fewer people entered the stores than had been anticipated. M & S management believed that, since they were so well known in Britain and since so many foreign tourists visited London stores, their reputation had preceded them. Belatedly, they learned that only 3 per cent of the French had even heard of M & S or St. Michael before the continental stores were opened. Store locations exacerbated the situation: M & S management wanted their first stores to be "flagships" and therefore sought to locate them on the most popular shopping streets. Since store space was at a premium on those streets, they had to settle for a spot in Paris where most pedestrian traffic preferred the other side of the street. In Brussels they accepted a store with a very small frontage that did not give an impression of a vast amount of merchandise on the inside. To get people to visit the stores, M & S had to depend much more heavily on advertising than the firm did in the United Kingdom. This was an added expense that made it difficult to keep prices low.

Another factor influencing costs was that M & S's continental stores lacked the kind of buying power that its stores in Britain enjoyed. Initially the company contracted nearly 80 percent of its merchandise from continental sources unwilling to treat M & S any more favorably than other department stores and retail chains already in the market. Most of the remaining merchandise came from the United Kingdom, where M & S had buying clout. Because much of the clothing was made to specifications to meet the French and Belgian needs (e.g., stronger buttons, single vent jackets, and pastel sweaters), the British producers had to make these items in short production runs. As initial large sales did not materialize, the U.K. manufacturers were reluctant to keep markups very low. Even when merchandise prices were kept low, M & S found the French highly suspicious of bargains.

An additional problem was that when potential customers went into the new stores, they were unaccustomed to the starkness and lack of service. A French fashion writer summed up the customer reaction to the Paris store as "not madly joyful unless of course one is as impervious to English shopping as one is to English cooking."

To bring customers into its Paris store, M & S has had to make operating adjustments. The primary change surprisingly has been in merchandise, the area where M & S had done so much preliminary research. In trying to copy what the continentals were offering in merchandise, M & S simply could not get a more durable product to customers at a sufficiently cheaper price to attract a mass clientele. However, it discerned fairly quickly that there was a small market segment willing to buy the more English-type merchandise for which M & S could exert its buying power. M & S now buys only 10 percent of its merchandise from continental sources and has differentiated itself from local competitors by capitalizing on its "English-ness." It now concentrates on such items as tan and navy blue sweaters, biscuits, English beer, and even a quiche Lorraine made in the United Kingdom. In deference to French tastes, M & S has carpeted its Paris store.

Not surprisingly, a large portion of the early customers turned out to be British living in France, but this gradually changed. Parisians learned to like wandering through wide aisles with shopping carts before paying for all merchandise at one cash register. One Paris store now sells more per square meter than any other department store in France, and about 90 percent of its business is to Parisians.

In entering the Canadian market, M & S assumed that the "English-ness" would be a greater advantage there than on the continent. M & S quickly expanded to 60 stores in Canada in order to get nationwide distribution. However, Canadians found the merchandise to be dull, the stores to be "cold and clinical," and they did not like finding food next to clothing. Most stores were placed in downtown locations, as is the custom in the United Kingdom. The Canadians were increasingly turning to suburban shopping centers, and only the M & S stores in those centers began to earn an early profit.

In 1979, after eight years of Canadian operations, M & S finally made an overall small profit in Canada, but this was short-lived; losses returned the next year. In deference to Canadian tastes, M & S has added fitting rooms, wood paneling, mirrors, partitions between departments, and wall-to-wall carpeting. There are still complaints about the merchandise, however. A former supplier opined that the British management did things "because that's the way they did it in England." This included the placement of bigger sleeves on clothing and the avoidance of livelier colors of clothing and of advertising. While Canadian stores carrying the Marks & Spencer logo have floundered, M & S has acquired two other Canadian clothing chains, D'Allaird's and Peoples. These acquisitions have kept their Canadian marketing programs and have been profitable. When M & S first entered Canada with its own brand of stores, management had hoped that the operations would serve as a springboard for entry into the U.S. market. In late 1986 it announced that the D'Allaird's chain had signed leases for sites at shopping malls in three cities in New York. In 1987 M & S appointed a top-level team to conduct an in-depth study of the U.S. marketplace to set up stores under the M & S name. One of the firm's executives said, "There is nothing like M & S in the United States, and we believe there could be good potential for us."

Instead, M & S concluded that the Canadian approach of copying the British formula would be a mistake; therefore, the company sought compatible U.S. acquisitions. The first, Brooks Brothers in 1988, seemed incongruous inasmuch as Brooks Brothers had a dignified image, much personal service, and expensive clothes. At first M & S announced that it would not change the Brooks Brothers' successful and profitable merchandising. But fairly quickly, M & S began trying to increase sales by changing some practices to bring less affluent customers into the stores as well. The company reduced the amount of personnel, began replacing glass display cases with open displays, ran six-week sales instead of the customary one-week ones, and decreased the number of sizes of casual coats by offering them simply as small, medium, large, and extra-large. During the first two years the results of the changes were disastrous as sales and profits declined. In 1991 Brooks Brothers announced it would try to turn its position around by offering higher commissions to sales personnel. John Weitz, a British designer, recommended that Brooks Brothers license its name to manufacturers so that the traditional suits could be sold elsewhere, while Brooks Brothers moved to less conservative styling in its own stores.

In 1988 M & S also bought Kings, a 16-store food chain in New Jersey. This acquisition has seemed compatible since Kings and M & S share an operating philosophy of emphasizing perishables and upscale prepared foods. Existing management stayed on to provide U.S. marketing expertise; and M & S began the following year to introduce its St. Michael chilled prepared food lines into the stores, while advertising them heavily and providing discount coupons in local newspapers. The U.S. introduction began with only 18 items, prepared in Kings' stores, as compared with more than 2000 items in the U.K., all prepared in central kitchens. Some of the U.S. items, such as chili con carne, are different from those in the U.K. Because of vast distances, the U.K. concept of overnight delivery from central kitchens is not practical for the U.S.; consequently, in-store preparation creates additional potential problems of cost and quality control if M & S follows its planned strategy of building a significant U.S. food presence.

New words:

shopkeeper – владелец магазина

retailer – розничный торговец

advertising – рекламный бизнес

disastrous - пагубный

to merge - сливаться

target - цель

pedestrian traffic – пешеходное движение

markup – торговая надбавка

suspicious - недоверчивый

bargain – торговая сделка

competitor - конкурент

suburban - пригородный

sleeves - рукава

springboard - трамплин