26th May 11
M&S to fit outlets to affluence of local consumers
by Natasha Redman
Rich pickings: M&S to stock stores depending on area's wealth
Rich pickings: M&S to stock stores depending on area's wealth
Marks & Spencer has announced its plans to segment stores based on the particular area’s affluence and demographics for the first time in the company’s 127-year history.
The retail giant revealed market share gains in food and general merchandise on Tuesday as it reported an increase in full-year profits. However, it said that it expects conditions in the year ahead to be challenging, despite a recent boost as a result of the royal wedding, bank holidays and April weather.
In the past, M&S had only segmented its product offer in the UK by the store-size. But from October, in several pilot stores, it plans to vary the merchandise and layout according to affluence, ethnicity and age, as well as competition faced locally. M&S’s chief executive Marc Bolland said that customers have informed them that their stores are sometimes not easy to shop in.
In simple terms, in areas which are affluent and have a high percentage of young children, the pilot stores will offer more childrenswear as well as its higher-priced Indigo and Autograph clothing. If it works, the retailer will launch the new concepts in 2012. But Mt Bolland claimed that it was simply the “best practice” and not “rocket science”.
He said that a large proportion of the £300m which it will spend in 2011 will go on its stores in the UK. While he said his earlier store mordernisation programme was required in terms of strengthening the core infrastructure, he admitted that it did not provide customers with an inspirational shopping environment.
In all its shops from the autumn, M&S is also to give a new identity to its core Marks & Spencer ranges, labelling them M&S Man and M&S Woman in order to strengthen brand values. This links in with the strategy unveiled by Mr Bolland last November to increase the M&S brand’s role and drive innovation, like with the “Only at M&S” labelling for exclusive general merchandise and food products.
This helped the group to increase sales across both these divisions, which resulted in the company deliver a rise in pre-tax profits of 12.9 per cent to £714m for the year finishing 2 April. While this was marginally ahead of consensus City predictions, it is still considerably lower than the £1bn which was posted in May 2008.
M&S revenues increased by 4.2 per cent to £9.7bn and the closely monitored like-for-like sales in the UK rose by 2.9 per cent. But international sales grew at a sluggish 6.1 per cent to £1bn, affected by trading in the embattled economies of Greece and Ireland. Mr Bolland said that it the UK shoppers are buying into quality, buying into smaller ticket products rather than bigger ticket products and they are also buying into treats.
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