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May 24, 2011

On the money: M&S to finesse UK stores

Marks and Spencer has revealed plans to redevelop its UK store estate using demographic data to tailor its offer.

Marks and Spencer has revealed plans to redevelop its UK store estate using demographic data to tailor its offer. 

Speaking today (24 May) about the motivation behind the plans, M&S chief executive Marc Bolland said that last year he asked ten people to go into an M&S store and collect a list of ten things within an hour. None of them, he revealed, were successful.

Bolland is planning to create a more inspiring environment in M&S’ UK stores with “improved in-store navigation and packaging architecture”.

The retailer has already segmented all of its stores using demographic information including catchment area, affluence and age, and it will begin to test a number of stores informed by this “clustering” from October, said Bolland.

The stores will each have a new template to ensure the most efficient space allocation and layout for each store, which means that stores of the same size will no longer necessarily carry the same range. Bolland suggested that the differences would encompass some 5-15% of the range offered in its stores.

M&S is also developing a “clear and consistent signage structure across all stores”, as well as developing new packaging and labelling across its general merchandise and food, which is set to be launched in October.

Bolland said the changes were “not rocket science” but claimed the store modernisation programme undertaken by the retailer’s previous management “has not delivered an inspirational shopping environment”.

He said the moves were the “the next stage” in a store modernisation scheme that had focused on improving the basic functionality in stores and improvements in core infrastructure.

Some 90 stores remain “unmodernised”, Bolland said, after M&S’s plans to revamp its outlets were brought to a halt by the economic downturn. The retailer now aims to complete the overhaul within the next three years.

The retailer plans to make staff in its food departments responsible for an area of the store. For example, Bolland said deli staff would be responsible for cleaning the deli section, availability and visual merchandising of their area. He said the move will mean that staff are more customer focused, and that there is someone in-store that “knows what they are talking about”.

Referring to the shift in responsibility, Bolland said: “Ownership of the business is extremely important.”

On store expansion, Bolland emphasised that M&S is “not in the race for space”. He maintained that the retailer was focusing on growing its click-and-collect “Shop Your Way” programme for general merchandise, while continuing to expand its Simply Food brand. Bolland is aiming for 95% of the UK population to be within 30 minutes of a full-line store by 2015, but once that target is achieved it would then place its attention on maintaining its current store estate and developing its online offer.

“We’re looking at 3% space growth over the next three years. After three years there will be hardly any space growth,” he said, emphasising the importance the ecommerce will play in general merchandise sales in the coming years.

While input costs continue to rise, M&S is forecasting a flat to 25 basis point increase in gross margin in the coming year. Bolland said that the retailer plans to mitigate rising input costs and not pass them onto consumers.

Speaking to just-food about how it plans to manage these cost increases, CFO Alan Stewart said that M&S would reduce waste, manage promotions better as well as through its “close relationship” with its suppliers.

The comments came after the retailer booked a 16.2% increase in net profit to reach GBP612m (US$987.9m) and a 4.2% increase in sales to reach GBP9.7bn.

Shares in Marks and Spencer, however, were down 2.47% to 387.2p a share at 15:53 BST today.

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