UK’s pride and joy Marks & Spencer feeling the pinch…

M&S knocked from the top spot retailer in the market to third position giving Sir Stuart Rose the last 18 months of his role to "up their game".

This week saw the release of private market research carried out by TNS Worldpanel, declaring that Asda has taken over Marks & Spencer in the UK and is now the biggest fashion retailer holding the largest market share. M&S sit third place with 9.8% ownership of the market, Primark second with 9.9% and Wal-mart giant Asda claiming the largest share with 10.1%. Although only minimal differences, the psychological consequences are huge for one of the UK’s original stores- M&S. They will certainly be feeling the “pinch” after dominating the clothing retail market for so long and now watching their discount rivals soar above them. Things just aren’t looking so “rosy” for Sir Stuart Rose…..

 

Asda-Gem in the crown (BBC News)

In a methodical report from ‘BBC News’ they managed to sneak in some opinion stating that Sir Stuart Rose of M&S, will be feeling the pressure as Asda emerges as the largest clothes retailer in Britain. His intentions were to “go out on a high” when he steps down from M&S next year. However in my opinion, if performance doesn’t creep up in the near future he may be sighing with relief when he steps down.

 

Managing Director of Asda Anthony Thompson spoke to ‘BBC News’ referring to the current situation as early sign of success commenting, “Our objective was to be number one by volume by 2011, so we’re 18 months early”.  Mr Thompson goes onto discuss the causes of this early success being that of the recession, whereby consumers have become money conscious, looking for clothes that are “quality, style and value coming together”. This is what he believes Asda has and M&S doesn’t resulting in Asda taking over the top spot of UK retailers. Mr Thompson is confident that they will hold this market position because they offer quality clothing, unlike their second place rival Primark. He believes that consumers have learnt through the recession to buy one-off, long lasting pieces rather than “throwaway fashion”. What has M&S got to say about Asda’s confidence?

 

The struggle of M&S (The Times)

Sir Stuart Rose has strived to display a significant difference between the likes of Primark and Asda with M&S. A spokeswoman for M&S commented to ‘The Times’ that the news isn’t a real threat for M&S. This is because they have the prosperous thought of growth in market share over this winter, when their clothing sales generally increase due to their highly regarded knitwear. But maybe a few knitted jumpers isn’t enough to get M&S back on top…

 

Reason being that there are other underlying issues for M&S at the moment. In the same article ‘The Times’ reflects back on a report they made earlier this year when they had an attack on rival Primark when Sir Stuart Rose commented “You cannot sell a T-Shirt in the UK for £2 and pay the designer and pay for the raw material, manufacturer, designer, rents, rates and pay fair living wage to the person who made it. I won’t sell a T-Shirt for £2”. With M&S determined to express their values for corporate social responsibility, it suggests that they are sub-consciously aware that their performance has fallen and so they need to protect the brand for the long term.  Should M&S be worried about growing competition from the likes of Asda and Primark?

 

Although not a solid source, a public blog under the ‘The Times’ article includes a comment made by one blogger sharing their view that “M&S is yesterdays news…like it or not, Primark offers unmatchable pricing.” With the public catching onto the cracks in M&S’s strategy, this may be just be the core of their recent decrease in market share.

 

M&S staying strong (Guardian and Reuters)

In fairness to M&S they have suffered attacks from both Asda and Primark (first and second position market share holders). Sir Stuart Rose has defended his role and showed a competitive long-term strategy for the future, something M&S has always been good at. ‘The Guardian’ discusses how Stuart Rose fought off a £9bn takeover bid from retail giant Philip Green, recognized for his achievements through shops such as ‘Topshop’. In times of a recession and during Rose’s last year at M&S one may think he should ‘snap-up’ the opportunity of a takeover and walk away confident that M&S will be OK.  However, I would conclude that Rose is doing the right thing by promising to improve the clothing strategy of M&S before stepping down in 18 months time. Furthermore, the results of M&S retail performance could be the consequences of the recession and with economists predicting recovering starting by 2010, I think there is still hope for M&S to possibly return to the top. Yet, one could argue that this principle is the same for Asda and Primark too...

Articles read:

http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article6867118.ece

http://news.bbc.co.uk/1/hi/business/companies/8299290.stm

http://www.reuters.com/article/rbssRetailDepartmentStores/idUSNWLA470920091001

http://www.guardian.co.uk/business/2004/aug/23/shopping.supermarkets