[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Thursday, 30 November 2006, 00:11 GMT
Have M&S cracked Christmas?
By Andy Dangerfield
Business reporter, BBC News

Stuart Rose
M&S chief Stuart Rose says the Christmas trading period is critical

Christmas is the most crucial sales period for High Street retailers.

This year UK shoppers are expected to be either at their most generous for 12 years, spending 17bn ($32bn) on gifts in the run up to 25 December, which is the prediction contained in a Deloitte survey.

Or it could be the worst Christmas in 25 years, which is what Seymour Pierce retail analyst Richard Ratner predicts.

Whatever the outcome, nowhere will Christmas be more telling of a company's future prospects than at Marks & Spencer (M&S).

M&S chief Stuart Rose has refused to label his firm's recent sales success "a recovery" until after the festive period.

"If you ask me in the first week of January, I'll give you a definitive answer," he says.

Marketing success

M&S's sales upturn has been driven by well received advertising, backed by better perceived values in their product offer, achieved through squeezing suppliers.

Their award winning "Your M&S'' campaign attempted to make customers feel the brand was theirs, rather than that of BHS owner Sir Philip Green, who attempted to buy the firm in 2004.

Costing an estimated 62m, the campaign has been credited with driving more than 18 million additional customer visits.

Sales of chocolate puddings, featured in the campaign, increased by 3000%.

M&S began promoting its ethical and environmental values, focussing on the way it sources product and asking customers to "look behind the label."

The campaign highlighted M&S's commitment to fair trade, GM-free food and animal welfare, issues that are seen as increasingly important among consumers.

And the firm's Bond-styled Christmas commercial, featuring Twiggy and friends travelling to Lapland to see Dame Shirley Bassey perform, has received acclaim.

"Having Elizabeth Jagger and Twiggy encapsulates their offer," says Verdict Research analyst Maureen Hinton.

Fast fashion

Mr Rose believes advertising has little success unless backed by strong product.

"Advertising is not worth anything unless the product stands up," he says.

M&S clothing
Customers want the latest trends, but interpreted for them.
Stuart Rose, M&S chief executive

Pushing suppliers for shorter delivery times has allowed M&S to swiftly respond to trends.

Their Limited Collection range goes from design-concept to stores in six weeks.

"They've moved from being supplier to customer driven," says Ms Hinton of Verdict Research.

"Customers keep returning if M&S offers something new each week."

"Their styles ape the latest fashions but won't shock," says Image Impact consultant Fi Ivin.

"Their ranges have a contemporary twist, and are good for women who don't have the resources to spend on high fashion," she adds.

And earlier, when he initially joined the company, Mr Rose said: "Customers want the latest trends, but interpreted for them. Fashion with a small 'f'."

'Virtuous circle'

The M&S chief seems to have brought much of what he learnt from working at Arcadia-owned Topshop to M&S, squeezing supplier margin, showing higher profit can be made by selling greater volumes of value product.

Within two years, M&S's value clothing has increased from 12% to 30% of their offer.

"They're in a virtuous circle, driving higher volumes and lower prices," says Ms Hinton.

"It's a bold move, but whether it's sustainable is another matter," says Mr Shiret.

Value clothing has attracted lower income customers into stores, but this strategy contrasts with an upmarket food offer.

"Their clothing strategy has gone downmarket, but their food has gone upmarket," Mr Shiret says.

Would a customer shopping at M&S for a 6 seven pack of knickers be willing to pay a similar amount for a ready meal?

With so many retailers shouting about price, Mr Rose has to ensure quality is not neglected.

He believes customers expect fantastic products and value, which he says "is a function of price times quality".

Stretching the brand

So what are the chances of M&S sustaining its recent sales success over Christmas and beyond?

Eat Over Delis
M&S has achieved success with Eat Over Delis and Hot Food To Go

Mr Rose plans to stretch the M&S brand.

Simply Foods stores are attracting younger customers and hot food counters are being rolled out.

M&S offers electrical goods, such as iPods, in 13 stores.

This year, the firm has invested 570m in modern changing rooms and shop fittings.

Its website is in good shape for festive trading, having recently been named most user-friendly site by web usability consultant Webcredible.

And "opportunities to broaden overseas are being pursued," Mr Rose says.

Sustainable recovery?

So it seems M&S has the ingredients ready for Christmas success.

But it is trading against a soft sales history.

Last year, its like-for-like sales increased by 3% in the 13 weeks to Christmas.

But that was against sales being down 6% in the previous year.

Historically, M&S has been bad at sustaining recoveries without cannibalising sales.

"M&S has its own 'cyclicity'," says Mr Shiret. "Someone comes in, makes changes and does well for a couple of years."

Four years ago, then-M&S chief Roger Holmes was celebrating a sales upturn.

Looking for growth, he launched a furniture-led Lifestore and a David Beckham clothing label.

Within a year, sales tumbled.

M&S lost market share to supermarkets and discounters, like Asda and Primark, who offered better value basics and throwaway fashion.

"There is a big idea, lack of attention to detail pattern running through M&S's history," says Mr Shiret.

Analysts agree that M&S has strong Christmas prospects.

"They're well positioned for pricing, product and stores," says Ms Hinton.

"The key issue is how long Stuart hangs around for," says Mr Shiret.

Mr Rose certainly plans to be there for Christmas 2007, when sales figures, against harder comparatives, will be more telling.


SEE ALSO
M&S tops High Street web ranking
24 Nov 06 |  Business
M&S move to create 250 new jobs
23 Nov 06 |  Northern Ireland
M&S sees half-year profits soar
07 Nov 06 |  Business
M&S opens electrical departments
03 Sep 06 |  Business
Sales lift continues M&S revival
11 Jul 06 |  Business

RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites



FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

PRODUCTS & SERVICES

Americas Africa Europe Middle East South Asia Asia Pacific