Marks & Spencer recently announced a 3.9% fall in underlying annual profit to £623m – the lowest level since 2009.
In an interview with BBC Radio 4’s Today programme Mr. Marc Bolland the retailer’s CEO said since he took over as CEO in May 2010, there had been heavy investment to make the retailer “fit for purpose”.
He said “General merchandise is not yet satisfactory.
But a lot of the heavy lifting has been done…It [rising profit] takes a while to follow. We are improving step by step”.
If Mr. Bolland was a football manager, he would have been thrown under a bus a long time ago.
Do not take my word for it, ask “The chosen one” sacked Manchester United boss David Moyes.
He did not produce results fast he was fed to the wolves.
This is because Manchester United is a business and like any sound business, they need to make profit.
So why is Mr. Bolland like his Tesco counterpart still at the helms despite the retailer’s dismal performance?
The answer is simple.
Unlike football, retail shareholders continue to accept retail executives excuses that their poor performance is the result of “difficult trading conditions”.
It never occurs to them that there are other retailers increasing sales and making profit despite the same difficult trading conditions.
Furthermore, like Mr. Bolland or Mr. Clarke of Tesco, many of the so-called retail experts interviewed by the media to ascertain the root cause of Marks & Spencer poor performance placed the blame on the wrong culprit.
The root cause of Marks & Spencer woes is Mr. Bolland and his team have not answered these three questions:
The Tesco Example
In his book “The One Thing You Need To Know”, author Marcus Buckingham said when he interviewed Sir Terry Leahy who transformed Tesco into a global retail power house.
He asked him how did he do it.
He responded that when he took over Tesco, the first thing he did was ask the question: ‘who do we serve’.
When he answered the question who Tesco serve, he sat out to create a Tesco that appealed to his chosen target market.
How Did Next Overtake Marks & Spencer?
Next recently, surpass Marks & Spencer profit for the first time in it 32 years history.
Next success stemmed from its home directory and online division.
The retailer banked £150 million on interest from its Next Directory Card.
Next target market is mostly professional females between 25 and 35 who are incapable of splashing cash each week for new outfit, yet they’ll like to.
However, they can afford to pay in instalment.
So Next printed counterfeit money in the form of credit card to give it customers to purchase from it.
There are laws against that, but it’s The Chancellor of the Exchequer (UK Finance Minister) who might want to have a word with Next about that…
Whether this will prove a calculated blunder in the future is besides the point.
The point is Next understood it customers, so it device a business model that allowed it to respond to their needs.
Who is Marks & Spencer serving?
That is the question Mr. Bolland and his team is struggling to answer.
The reason they are struggling to answer this question is they are still trying to serve the same demography they served hundred years ago with different merchandise.
That will not work.
Why wouldn’t it work?
This brings us to the next point which is: what are we selling?
I read most of the comments made by “retail experts” as to the reasons for Marks & Spencer poor performance.
All of then laid emphasis on Marks & Spencer merchandise.
Some suggested Marks & Spencer sell clothing from other fashion designers or bring in different designers to design it clothing lines.
Some suggested the retailer sell more food.
Like most retail experts, their suggestions are based upon the premise that customer go into Marks & Spencer for it merchandise.
They like many retail experts have still not come to the epiphany that shoppers no longer go into a retail store to buy the merchandise but to buy the experience of buying the merchandise.
The Richer Sound Phenomenon
Let’s use the example of Richer Sound to illustrate this point better. Richer Sound has the highest sales per sq. ft. than any retailer in the world.
It has held that position for over 20 years.
Richer Sound sells home entertainment.
What the majority of people who buy home entertainment dread is setting up and operating complicated electronic devices.
Everyone love the comfort of what electronic devices brings when they are up and running.
However, setting up a home entertainment to the point that it is running smoothly is not an easy feat.
Senior management at Richer Sound being well aware of this ensure Richer Sound have knowledgeable staff capable of answering customers questions and helping them choose the best system for their situation.
Richer Sound has the most knowledgeable staff in retail industry in the UK.
Year after year, Richer Sound continues to top ‘Which’ survey for having the most knowledgeable staff in the retail industry.
Many of the stuff people buy from Richer Sound could be purchased online for a quarter of the price if is sold for in Richer Sound.
Yet people choose to spend almost three times the price they could buy those products online for in Richer Sound.
What they are paying the extra money for is not the products but the knowledge of the staff.
I have given the example of Richer Sound to illustrate the point that people do not go into a retail store to buy the products, they go to buy the experience of buying the products.
What Mr. Bolland and his team needs to be asking themselves is: what experience are they selling to their customers that will make them want to go to their store instead of Next, John Lewis or other retailers.
Lessons from Harrods
During my research for my books on store design and visual merchandising display, I visited Harrods.
Harrods attracts royalties, A-list Hollywood stars, heads of states and the “who is who” from around the world.
So you can imagine my anticipation at visiting one of the most famous retail stores in the world.
I was hoping I will catch a glimpse of some Russian oligarch or Saudi prince.
However, instead of Russian oligarchs or Middle Eastern Sheikhs, what caught my attention was a toy bus.
I had bought the identical bus for my son from ASDA.
It was the same bus in the same packaging.
An odd question popped into my mind when I noticed the bus… Why is it that the same bus… In the same packaging…
Probably made in the same factory in China…
By the same people…sold in Harrods for almost three times the price it was sold for in ASDA?
At first it seemed a mystery to me…
But as I walked around Harrods the answer came to me. ASDA sells a toy bus.
Harrods sells classy toy bus even if it is made in the same factory in China.
There is a difference and that difference is what these books are about.
As stated previously, the price of a product is determined by:
The reason the same bus, made in the same factory in China was sold in Harrods for almost three times the price it was sold for in ASDA, comes down to who shop at Harrods and how the bus was sold to them.
The royalties, A-list Hollywood stars, heads of states and the “who is who” from around the world who shop at Harrods do not go there to buy the crappy plastic made in China for fifty cents, they buy the experience and feeling of buying in Harrods.
What Mr. Bolland and his team can learn from Harrods is, Harrods use it:
To sell the same crappy made in China bus for three times the price it is sold for in other retailers because the price of a product is determined by who is buying and how it is sold to them.
What Mr. Bolland might want to do is have experts fashion consultants in his store to help his customers.
Imagine someone entering Marks & Spencer to buy a suit and there is a fashion consultant there to help them choose.
Tell them what colour will suite them the most, What shirt will look good with the suit etcetera… etcetera… etcetera.
Don’t you think they will be able to sell the same suit for five times the price and the customer experience will be completely different?
He will not even be paying for the consultants, they will pay for themselves.
That is one easy way of increasing his store profit.
Richer Sound is doing it, why can’t Marks & Spencer do it too.
Dear Mr. Bolland,
when you implement my idea please do not forget to send my check.
As you can appreciate I make my living from consulting retailers like you.
My son love video games.
In other for me to buy him his games, I cannot afford to be dishing out free advice.
Just kidding, go ahead and use it.
# # # #
In this fiercely competitive retail environment, the tiniest of things can make an enormous difference to your sales and profit margin.
Click on any of the links below to gain access to highly valuable resources specifically engineered to help retailer like you increase your sales and profit margin:
How to Increase Retail Sales Books: http://romeorichards.com/books-retail-increasing-retail-sales-store-design-visual-merchandising-display/
How to Increase Retail Sales Home Study Course: http://romeorichards.com/home-study-increasing-retail-store-sales-store-design-visual-merchandising-displaypost-launch/
Call 020 8798 0579 or email: firstname.lastname@example.org for a FREE strategy session.