From the Archive: M&S online
‘From the Archive’ is a new regular column that revisits some of the more interesting retail stories covered over the past 30 years by Glynn Davis for a variety of publications.
This period covers many seismic structural changes in the industry including the emergence of the internet and we begin with a piece from the early days of online shopping.
Alongside the actual stories Glynn will be adding commentary around each of the pieces that will seek to put the articles into context with today’s landscape.
From The Industry Standard Europe (26 October 2000)
The back-end of 2000 was proving a particularly tough time for Marks & Spencer. My article for US-based publication The Industry Standard Europe highlighted the departure of its CEO Peter Salsbury on the back of a raft of issues.
Everything was declining at the business but there appeared to be a potential silver lining in the form of e-commerce. These were very early days of the internet and M&S had bravely formed a Ventures division to invest in new channels and undertake partnership deals. These included some now odd-sounding things such as anchoring Microsoft’s shopping channel, selling through interactive TV channels, and taking stakes in Talkcast and Confetti Network (remember this wedding goods site?).
This was all progressive stuff – I think – but the main thing was that it had also set up its own online shop. But the pesky City analysts were already questioning the results. They were probably correct though because my piece reveals sales in its first 12 months of trading amounted to only £150,000-200,000. This compared to the online sales of Next that were forecast to hit £10 million that year.
Analysts need not have been too worried because after this stuttering start M&S has ultimately built its online sales – in clothing and home – to account for over 30% of its total sales in these categories. This equated to around £2 billion in sales for the year to end-March 2024. Food is also accounting for a growing percentage of sales in its category.
M&S still finds itself behind Next though, which had built its online sales to £3 billion – for the year to end-January 2024 – and has continued to be the exemplar in operating across channels. The analysts were, however, correct in their overall assessment of the strategy of M&S back in 2000 with Mark Charnock of long-gone CCF Charterhouse stating: “There are big long-term opportunities in selling things online.” Too right Mark.
While sales have dramatically improved for M&S online the article also highlighted it was facing issues with returns running higher than forecast. We might now be 25 years on from my article but returns remain an issue for M&S and pretty much every other retailer selling goods online today.
Full text of article
Tiny Rowland, the late chief executive of Lonrho, once famously remarked: “A good problem makes me come alive.” If this is the case for Marks and Spencer, then these days the company must be feeling very alive indeed.
The long-established UK chain has endured flagging sales, redesigns, declining food sale profits, staff cuts (including the exit of its CEO, Peter Salsbury), and a plunging share price. It is widely expected to announce store closures soon.
Yet there have been some signs of life lately from Britain’s second-largest retailer (after supermarket chain Tesco). It has recently signed a raft of deals to establish new sales channels through television and the internet. One agreement with the Microsoft Network will see M&S act as an anchor tenant on its shopping channel. Others allow it to provide content for the BBC’s Beeb.com shopping site and to sell goods through the interactive digital TV shopping channels of Open and Telewest.
Further evidence of Marks and Spencer’s evolution comes from its one-year-old Ventures division, a wholly-owned subsidiary focusing on digital commerce. Ventures has struck a deal with business-to-business exchange Worldwide Retail Exchange; it has also taken stakes in digital media and communications company Talkcast and wedding Web site Confetti Network.
Peter Robinson, head of e-commerce at M&S, says: “We are surprising people, as we are trying to think differently about the new opportunities. But as everyone knows, these [ventures] will have to materialise in results.”
For Ashley Thomas, analyst at Commerzbank, these results may take too long to appear. While Robinson says M&S has sold between £150,000 and £200,000 worth of merchandise (€250,000 to €330,000) since it launched its online shop last November, Thomas compares this with clothing retailer Next, which is forecast to sell around £20 million (€34 million) of clothing through its Web site by the end of the year.
Robinson argues that his team at M&S has been building a multi-channel infrastructure that is fully integrated into its existing business. “This adds complexity and takes time to build, but has tremendous potential,” he says.
Yet it’s not clear that M&S has mastered the tricky back end of out-of-store sales. Its mail order operations have run into problems: returns are running higher than forecast, and the stocking and pricing of goods often varies between its catalogues, Web sites and stores.
“I don’t think that M&S has yet proven that it has gained true mail-order experience,” says Thomas. “To build e-commerce on top of this is probably too audacious: they have to deal with two learning curves at the same time.”
While agreeing that logistics need work, analyst Mark Charnock at investment house CCF Charterhouse says that M&S is right to pursue an online strategy. “There are big long-term opportunities in selling things online,” he notes.
A sensible deal for M&S could be to get somebody else to handle the delivery side of things. A rumoured deal with N Brown’s subsidiary Zendor.com — which handles online fulfilment for companies such as British clothing retailer New Look — would help to dispel doubts about M&S’s ability to take full advantage of its new sale channels. Which would mean one less problem for Marks & Sparks, but probably even Tiny Rowland would have agreed that you can have too much of a good thing.
