The food side is doing well, but there are major problems in general merchandise (GM).

Food – the good news

The food business shows just what M&S is capable of. It is motoring at a time when many food retailers are struggling and the hard discounters, Aldi and Lidl, are gaining share fast. But they trade on great value for money and so does M&S and value for money is what food retailing is all about at the moment.

General merchandise – the bad news

The problems are in general merchandise. Like-for-like sales have fallen during a period when retail sales demand was strong. M&S had the benefit of Easter this year when last year it fell in the previous quarter. And it was a good Easter as well – as a warm, late Easter usually is.

M&S points to problems with its new website and online sales actually fell by 8%. However, if all of that decline in online sales was lost business (and there is no reason to suppose that it was) then M&S was still losing market share. It looks as if store sales of GM were little better than flat, while (according to the ONS) clothing retailers sales in April and May were up 6.5% and furniture retailers were up 4.4%, benefitting from a much stronger housing market.

But yet again the disparity between clothing and homewares is striking. M&S doesn’t spell it out, but homewares sales must have been very weak, perhaps as much as 10% lower, to have pulled total GM sales down as much as they appear to have done. Homewares should have been performing very strongly in current market conditions. One explanation could be that M&S has been switching space from Home to Clothing.

And a recovery?

One cannot write off M&S. The food business is still immensely strong and M&S is now, in terms of sales, primarily a food retailer. In Mintel’s brand research it always leads the way on brand trust. There is still considerable goodwill for the business. Shoppers are more than happy to buy there, but they need to see merchandise they like as well. Shoppers, even M&S’ over 50 customer base, are much more choosy these days and much more demanding. They no longer have to give second best the benefit of the doubt because they can check online to see what other retailers are offering. And this is not just simply about price, it’s about value.

So there’s no reason at all why M&S should not stage a recovery. But it comes down to the womenswear and we think there are two underlying problems. First M&S seems to have lost touch with what its core 50 year old customer really wants and, second, none of its sub-brands are geared to attracting younger customers in the way that Per una used to. M&S needs to be attracting younger customers, the upper end of the Next customer base, if it is not to end up ageing with its remaining customers. Mintel’s market research shows that M&S already has the oldest customer base of any of the major retailers and it cannot afford to let it age further.

Challenging times

The major impact of the internet has been to make customers better informed. It’s easier these days to compare one retailer with another, so retailers that fall short are punished much more severely than they used to be. The difference between success and failure for a season’s ranges is therefore much smaller than it used to be. But it also means that customers will be quick to switch back to M&S if it has the merchandise they want.

It would be wrong to overstate M&S’ problems, but equally it would be wrong to underestimate the challenge of restoring some sales momentum.

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