The boy stood on the burning deck - M&S troubles go on

Profile picture for user gonzodaddy By Den Howlett July 11, 2018
Summary:
M&S is a 'burning platform' says chairman Archie Norman - but can the ship be saved?

archie norman
Archie Norman, chairman M&S

At yesterday's AGM, Archie Norman, Marks & Spencer (M&S) chairman spared no-one when he said:

There is no doubt in my mind that we face formidable headwinds and transformational changes are needed. The continued migration of clothing and home online, the further development of global competition, the growth of home delivery in food and the march of the discounters all amount to threats that are eroding our business and market position. These, together with a challenging UK consumer market, mean that we have a burning platform. Accelerated change is the only option.

More worrying, CEO Steve Rowe says that the digital part of the business is in poor shape. From the Guardian's reporting:

The pages on its website still take 50% longer to load than its slickest rivals despite a £150m revamp while its purpose built warehouse in Castle Donington, Leicestershire could not support its stated ambition to have 30% of its clothing sales online in five years time. “We are not digital in an age where most retail starts with a mobile phone.”

We have covered M&S for some years, endeavoring to be optimistic about its prospects. For instance, in late May, Stuart Lauchlan said:

Too many digital transformation programmes are about the flashy front end and the cool user experience. Those are important, absolutely, but so is fixing the stuff in the engine room! It’s fine to focus on the jacuzzi, but if the plumbing doesn’t work then you’re not going to get any bubbles! M&S has a lot of catch-up to do technology-wise, but the five year plan looks sound. One to watch for the next few years at any rate.

But long before that, the previous year, in fact, Stuart asked:
M&S knows that there’s a digital revolution in retail, but it’s left it too late to catch up. Even the idea of online grocery delivery is only being addressed in a “very, very, very” small trial. What can be done to rescue a UK retail shopping institution from its own lack of ambition?

Steve Rowe, CEO M&S
Steve Rowe, CEO M&S

Hearing Rowe talk about the estate and years of mismanagement, it strikes me that while technology is lauded as a way our businesses should be organized, there is no escaping the outcomes of fundamental missteps.

Unlike Stuart, I can remember the last time I visited an M&S store. It was to buy a belt. The store in question is in one of its prime locations and yet was almost empty. One cash till area was unmanned. Both tills were difficult to find.

I asked the person who served me whether that store was under threat. She said 'no' pointing up that while media points to store closures - currently pegged at 100 but others are not ruled out - she also explained the rationale.

M&S has made the classic mistake of having what I term an ego-driven culture where the old joke 'never mind the quality feel the width' perfectly describes M&S management attitude towards its burgeoning estate. The stores under slated for closure have been consistently losing money for years, sheltered by the performance of those in prime locations.

In short, the business has not been optimized for the physical world, let alone the online alternative. What's worse, morale among the stores that are performing well has been undermined by the past estate policies. The person I spoke with welcomed the changes, believing that Rowe is making the right decisions for everyone.

Whether she will be proven right or not is moot at this time but Rowe and his team's choices are limited. He has to find the resources to not only return the business to profitability but also provide enough resource bandwidth and incentives for existing staff with which to tackle the omnichannel imperative.

My take

In the annual statement, M&S describe where they are at as fixing the basics. I get that, But equally, I find it staggering the company has blown out £150 million on a sub-performing website. It doesn't bode well. It would not surprise me to discover that there is an overhaul of the manner in which IT projects are delivered at M&S - it is sorely needed.

Let's hope that Norman's words don't turn into a sour version of the old joke that goes -

The boy stood on the burning deck

Whenst e're one else had gone. Twit!

The good news is that we've seen storied firms rise from the ashes of near certain destruction in the past. It is do-able. Not necessarily with the right strategy but always with enough people willing to understand the enormity of the challenge before them and getting the thing done. I wish Rowe and his team well.