Archie Norman, Chairman at UK retail institution Marks and Spencer, can always be relied upon to cut to the chase as evidenced during the company’s Q2 numbers:
When we drafted the statement and first showed it to my non-executive directors, the headline was "transformation beginning to bear fruit." And the non-execs said, ‘Not a lot of fruit in these results’.
The chosen alternative became ‘transformation happening at pace’, a statement that might also be contested when it comes to the digital elements of that change program.
While M&S’s forthcoming alliance with Ocado for online grocery shopping is awaited with keen anticipation, CEO Steve Rowe was candid when it came to assessing other aspects of the firm’s online business , summed up in one word - flat:
In terms of online, the market was flat. It's been the worst 6 months in the online market for a long time. We were marginally ahead of that, but a long way short of the progress that we'd been making up until this first half.
On the face of it, there was some good news - online traffic grew 8%, for example. But every silver lining has a cloud. Rowe explained:
That's good, but we drew it not by direct traffic, but by paid search, by mobile and also by e-mail. Now the fact is that this converts to a much lower rate than direct. You can see that come through in the shape of our orders. Some of that is a market trend as people move more to shopping on mobiles and desktops and tablets, but some of it is about how we drove the traffic.
This throws up other issues:
Our search engine optimization is not good enough, much more to do. We need to tidy the sites up and be clearer about how customers can get to the products they want quickly. We've introduced an internal search engine team, which we didn't have before. And we're moving fast to make changes. In addition to that, the website was affected by the same problems in our stores: lack of availability, lack of depth in buying.
We want to make sure we are protecting where we lead. And we're compensating really for some bad search work inside of own website. It’s one of the things that Google was very clear about - if you set your website up to optimize for customer search terms, you're doing well. If you don't, you don't. And there are areas where we had not done that as well as I'd like. We changed that now, but we've been, if you like, supporting that with paid search. The problem with supporting with paid search is you don't get the conversion rates, and that's why we've also been supporting it with e-mail.
With that off his chest, Rowe highlighted how such issues are now being addressed:
We've introduced Clearpay to our payments. This means that customers can stagger payments for merchandise, something that others already do. We've introduced Bloomreach as an internal search tool, which is optimizing search in every category, and this AI process learns all the time and helps customers get to the merchandise more quickly.
The work that Jeremy Pee is doing, our Chief Digital and Data Officer, in building a data lake from the many data puddles that M&S has got is progressing well. And he's in the process of re-evaluating all our Sparks [program] and making sure we're ready to launch a new loyalty program at the beginning of next year. He's bringing both digital and data capabilities together to make sure we're in the right shape for the future.
Our website performance is more than 20% up. And we've continued to launch local-language websites in many countries, and we're going to launch a new one in India in the next few months.
The Ocado tie-up can’t come soon enough…
Rowe’s mea culpa messaging about the sluggish nature of other aspects of the firm’s online strategy is welcome candor, but hardly inspiring. It looks as though the problems are being addressed but investors will be looking for a more upbeat start to 2020. Meanwhile Black Friday and Christmas loom, the next big test of M&S’s turnaround plans.