To what extent do you believe that the recent announcement by Marks and Spencer is a good strategy to achieve this aim? Refer to Porter’s Five Forces in your answer. (20 marks)
M&S have clearly identified that their clothing and homeware stores are not as profitable as they hoped, if they are even turning a profit at all. Similarly, M&S are aware that food stores are more profitable and are likely a more sustainable long-term business option.
The clothing that M&S sell is typically towards the higher end, with a luxury focus. This means they will be using more expensive materials and therefore charging a higher price to consumers. Whilst historically this may have worked well for them, the current economic climate in the UK means that fewer consumers have sufficient disposable income to warrant purchasing luxury clothing items. Because of this, M&S are likely suffering a down tick in sales for clothing which means that they have taken the time to review their options. It is important that they consider there options quickly as if they leave it too long they risk failing to retain a competitive edge.
M&S have made the realisation that many people are now shopping for clothes online, whilst food sales are still primarily in-store. So M&S are transitioning their clothing business to a cheaper online model, which will also likely attract additional customers. In parallel, they are converting their old clothing stores into food ones, as they are confident that people will still buy their food in store, and that it will be more sustainable for the business to sell food directly.
Most of the competitors that have appeared to rival the food business M&S have are at the very least offering their customers the option to buy online. This is an expectation and gives new entrants into the market an advantage over any older businesses that sell exclusively in physical stores.
However, it is important for M&S to realise that by transitioning to an online model for their clothing brand, they are going to face much fiercer competition. It is a lot more work for a customer to walk to a different clothing store than it is for them to go to a different clothing website. This increased intensity of rivalry might force M&S to compromise in areas that they have historically never had to compromise on. Most online stores offer discounts fairly regularly, and provide robust returns policies. If M&S fail to meet these customer expectations, then they may struggle to build themselves a niche in the online clothing market, leading to their clothing brand loosing relevance. This is a major threat to their business, and means that they have to get this transition right.
Overall, I feel that M&S have recognised the importance of adapting their business to the modern age where everyone expects online shopping, however I am concerned that if they do not prepare themselves for the challenges that come with e-commerce they may face being left in the dust. The conversion of their old clothing and homeware shops to food stores does however sound like a good idea, as the M&S food brand is strong and will be able to attract sales easily, so this will almost certainly increase their dominance in the food market. By using online stores for their clothing brand, they will likely be able to reduce costs as fewer staff members will be needed and they will only needed warehouses, rather than stores and warehouses. A cost reduction and a restructure of how they sell should give them a boost that, if handled properly, could accelerate their clothing business into the future.