M&S CEO – we need more tech, but we still don’t need to do online grocery

SUMMARY:

M&S CEO Steve Rowe updates on the digital transformation of the ailing UK retail institution.

Steve Rowe

You can’t fault Archie Norman’s comic timing. With the US mid-term election results made public, the Marks and Spencer Chairman opened up an update on the latest set of dismal results from the UK retail institution with a reference to events over the Pond:

If Steve were Donald Trump he’d probably be declaring the results to be a great personal triumph.

Steve is Steve Rowe, CEO of M&S, and the man charged with turning the retailer from being one which was bogged down in processes that meant it took 12 weeks to pull together a prawn sandwich which would then be sold in stores that were built prior to World War II, into an omni-channel entity that can be “fit for the future”.

A major problem with this vision has been the laggard nature of M&S’s digital focus, something that we’ve tracked a lot at diginomica. There has been progress, insists Rowe, pointing to a stat that says 20.4% of the firm’s clothing and home offerings can now be found online. But that’s less than a quarter of the total, in 2018 at a time when Amazon’s inventory expands and expands.

There is a long way to go, admits Rowe, eschewing a Trumpian self-declaration of victory, but the firm is passing through the necessary process of getting the basics back in order – and digital is firmly at the heart of that:

Digital is fundamental to a business that’s going to change for a future where we believe that just to hold market share, we need to have a third of our business online within the next 5 years. I’m pleased with some of the basic improvements we’ve had on the web platform in the last six months. We’ve improved our page speeds on the product loads by about a second. Our [web] photography, particularly on women’s wear, has become more inspirational. We’ve moved our order cut off from 8pm to 10pm for next day delivery [for Click and Collect]. And we’re piloting as one of the first retailers to do Shoppable Instagram.

But this doesn’t make us best in class, not by a long way. And not in an arena where the competitors are moving exceptionally quick. We’ve got much more to do and it starts with building the resilience of the site. We continue to work on that and on our delivery proposition. Importantly, while we’ve got good traffic, we need to improve our conversion. We need to make sure that our customers are sticking to the website and come back. That [means] further improvements in photography, in search engines, in payment technologies and in speed. We’ll be tackling this over the next 6-9 months.

More technology

Rowe does make the important point that digitising M&S is about more than just looking at online and is also about embracing new technology ‘ “we need more technology!” – and using that to introduce new ways of working:


We’ve also got to develop a more agile approach and this is being rolled out throughout the business. There are examples of this working well. The Mobile/Pay/Go technology that we launched in our store at Waterside House, which allows customers to scan products with their mobile phone and pay instantly, was launched in just a few months. But that way of working is not universal.

A challenge is to lure more talent into the business, Rowe cites the example of Jeremy Pee, whose been recruited to lead a turnaround of data and loyalty programs and who has already been given an ‘item one’ on his ‘to do’ list – kick start the Sparks loyalty card programme:

We’ve got to make sure we get Sparks right. Customer sign-up rates have been fantastic. The points accrual is also fantastic. Customers are now telling us that they want to know what they’re going to get as a treat. On Jeremy Pee’s job list, day one, is reset Sparks to make sure we have a loyalty business that we can truly join-up and access the data to convert more customers.

That data needs to be used to provide better insights into customers and their needs as well as introducing automated operational improvements in-store. That means, says Rowe:

We need to make sure we’re bringing more data scientists into the business as we start to use machine learning more and more… The other thing we have to do is not just talk about AI – it’s easy to talk about this stuff – but we’ve got to bring it right into the heart of retail. That’s why the programme we’ve launched with Microsoft is so important…Microsoft has had 40 engineers in our business over the past few weeks, looking at how we progress this technology.

Working with third parties is something that M&S has more actively pursued, he notes:

We’ve got to encourage more entrepreneurial thinking across the business. As a first stage, we’ve partnered with Decoded, who are helping us understand the opportunities for digital science. A thousand of our colleagues are going through a one day course and 150 this year will go through a Fellowship, 18 months of intensive learning with a qualification at the end. We’ve started to work with Founders Factory, a joint venture which gives us access to new start-ups which we’ll partner with over the next year. And True, who specialise in retail start-ups and new technology.

But there remains one area in which Rowe is resistant to working with third parties – online groceries. While other providers have been open to working with the likes of Ocado or shipping goods via Amazon Fresh, M&S’s antipathy to online grocery delivery remains hardwired, despite running a limited trial over the past year or so. Rowe sternly says:

The very very small trial was a very very small trial. We’ve continued to run it, we’ve continued to learn things, but we will not rush into things that don’t make money…it’s not a sustainable model that we can roll out as it stands today. We’re still very interested in looking at food online …but we have no plans to scale that at this stage…and no plans to use any third party at this stage.

My take

The stoney silence from retail analysts in the room that greeted that last comment told its own story.

It’s not so much that M&S hasn’t got its online grocery act together that concerns; it’s the fact that Rowe seems hellbent on not exploring options there more aggressively.

Elsewhere, he’s correct – there are signs of some progress on digital transformation, but it’s moving incredibly slowly. It’s telling that after showing a Microsoft promotional video that enthusiastically showcased its work with M&S, Rowe’s immediate reaction was to caution analysts that this was Microsoft pimping itself, not M&S.

The CEO’s presentational style throughout this update was nowhere near Trumpian self-praise despite Archie Norman’s opening gag. While that’s of course to be welcomed, there has to be something pitched between that and Rowe’s downbeat delivery, something to give us some kind of hope that he can Make M&S Great Again.

Image credit - M&S

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