Retail Evaluation for Marks and Spencer and Debenhams Companies - Case Study Example

Executive Summary Marks & Spencer: 2 About: 2 History: 2 Place: 4 Promotion: 4 Franchise Relationships: 5 Brand Management: 5 Merchandise: 5 Systems: 5 Product Range: 6 DEBENHAMS: 6 History: 6 Departmentalization: 7 Designers at Debenhams: 9 International brands: 10 Conclusion: 10 References: 11 Executive Summary: This report discusses a complete retail evaluation for the two companies, Marks and Spencer and Debenhams. Both of these retailers are UK top retail stores. This report evaluates the organisation in term of characteristics, history and their performance as retailers. These retailers retailing mix is also evaluated in this report. Marks & Spencer: About: Marks & Spencer commonly known "M & S" is one of the top British retailer companies. It is ranked amongst the most prestigious chain of stores in the UK and is the largest clothing retailer in the UK by turnover. It also is a multi-billion pound food retailer. Most of its shops sell both of these categories. Marks & Spencer also has a third product line related to home wares such as bed linen, but this is far smaller than the other two. For much of the 20th century M&S was regarded as the leading retailer in the United Kingdom, and an icon of British business. In 1997 it became the first British retailer to make a profit before tax of over 1 billion, though within a couple of years it plunged into a crisis from which it has not yet fully recovered. It is now less than one quarter of the size of the UK's largest and most profitable retailer, Tesco(http://www.marks-and-spencer.co.uk) History: Marks & Spencer unlike most of its rivals didn't instantly jump into the television advertising for its marketing and to draw customers. Marks & Spencer launched its first advertisement as late as in the mid 1990s. By selling British-made goods Marks & Spencer made their reputation. They entered into long term relationships with British manufacturers, and sold the goods under the "St Michael" brand (trademark registered in 1928), which was used for both clothes and food (Wall Street Journal,2006). Initially Marks & Spencer accepted the return of unwanted goods, with no time restriction, giving full cash refunds if the receipt was shown. Now it has changed that policy and has adopted a 90-day returns policy. This act made many loyal customers of Marks & Spencer to refrain from buying. The company's main prominence is of quality, but initially it also had a reputation for offering a good value for money. When this reputation began to waver, it encountered serious difficulties. It is a fact that M&S has historically been an iconic retailer of 'British Quality Goods.'(http://www.marks-and-spencer.co.uk) In 1988, Marks & Spencer acquired an American clothing company and a US food chain, naming Brooks Brothers and Kings Super Markets respectively. Marks & Spencer profits were maximized during 1997-98. But these profits were short term due to the rising cost of using British suppliers. Customer loyalty eroded quickly as rival retailers increasingly imported their goods from low-cost countries. In addition, it also lost its fame in the young generation who were reluctant to shop with it. These factors further plunged Marks & Spencer profits into a sudden slump, which took every one by surprise. The company's share price fell by more than two thirds, and its profits fell from more than a billion pounds in 1997 and 1998 to 145 million in the year ended 31 March 2001 (Fort Worth Star-Telegram). In 2001, with changes in their business focus such as the introduction of the "Per Una" clothing range designed by George Davies, accompanied by a redesign of their underlying business model, profits recovered somewhat and M&S recovered some of its market share but this these profits were also short lived(Karen Barth, 2001). Place: Marks & Spencer have adopted an indirect marketing channel i.e. it maintains distribution channel as follows Producer Retailer Consumer Marks & Spencer usually have its own retail stores Promotion: Advertisement: Marks & Spencer is now investing more and more on advertisement to revive its profits and recaptured its lost market share. A typical example is the introduction of limited edition clothes and accessories by Marks and Spencer's and having a high advertisement expenditure in fashion magazines like Vogue and Harpers & Queen, which were previously the sole domains of luxury brands. Franchise Relationships: Marks & Spencer maintains a direct link with its franchise partners by a dedicated Country Manager at Marks & Spencer's London Head Office for this purpose , who provides commercial and operational guidance and keeps the franchise partner up to date with all the latest retailing developments. Brand Management: Marks & Spencer is very peculiar about its brand image and therefore for this purpose it provides a clear guidance on how to use the Marks & Spencer brand to ensure maximum impact. Marks & Spencer also work closely with the franchise partner to help them gain maximum value from Marks & Spencer. Merchandise: Information and practical advice on which merchandise to stock, to ensure the franchise partner stores always have the right products in the right place at the right time. Systems: The franchise partner also benefits from some of the world's most advanced systems for managing every aspect of a fast moving retail business, as well as access to Marks & Spencer's leading IT support team. Product Range: Marks & Spencer has a wide range of products. These products are classified in the following categories: Home Care which includes products for Bathroom Care, Kitchen Care, General Care, Plant Care. Clothes Care which includes Detergent Liquids, Detergent Powders, Detergent Tablets, Fabric Softeners Air Care which includes Room Mists and Liquid Fresheners. Clothing and apparels, Footwear Food and diary products, etc. DEBENHAMS: Debenhams Ltd is a chain of department stores based in the United Kingdom. Debenhams Retail is a "plc" and is part of the Debenhams Group of Companies which is owned by CVC Capital Partners, Texas Pacific Group, Merrill Lynch Global Private Equity and management (www.debenhams.com). History: Debenhams was started in 1778 as a drapery shop opened in London in a shop at Wigmore Street. Debenhams group grew its operations from acquiring new department stores throughout the UK. It's first such acquisition was "Marshall & Snelgrove" in Oxford Street, London in 1919. Later acquisitions included stores such as Rylands in Manchester and Browns of Chester (www.edinburgharchitecture.co.uk/debenhams_edinburgh.htm). Debenhams was listed on the London Stock Exchange in 1928 and continued to expand. In 1985 the company was acquired by the Burton Group. At this point the company owned 65 stores. Debenhams demerged in 1998 and was once again listed as a separate company (Glynis Jones, 2001). The company expanded rapidly throughout the 1990s and now has a total of 120 stores in the UK and Ireland. In 2002 a loyalty card, as a major sponsor, was introduced with Debenhams known as the "Nectar Loyalty Card". This card now allows customers to collect loyalty points from a range of retailers such as Sainsbury's and Ford amongst others. Debenhams Account Card is still a major source of revenue for the company ensuring customer loyalty. The company was taken over by a private consortium in late 2003. Recent speculation predicts a return to the stock exchange in 2006. The company returned to the stock exchange on 4th May 2006 (www.debenhams.com). Departmentalization: Debenhams stores are usually departmentalised as follows: Fashion Accessories which includes Jewellery, Men's & Women's watches, Women's Footwear, handbags etc. Health and Beauty which includes Cosmetics, Fragrances & Toiletries Menswear which includes Men's Casual Clothing, Sportswear, Formalwear, Men's Footwear etc. Home which includes Bedding, Electrical, Furniture, Soft Furnishings, Lighting, Luggage & Kitchenware Women's Wear which includes Designer Women's Clothing, Bridalwear & Lingerie, Children's which includes Children's Clothes, Accessories, Footwear & Toys, Food Services Wedding Service Young Fashion Debenhams stores vary greatly in size from the flagship store in Oxford Street, London to the smaller stores in locations such as Bangor. Some such stores do not have a full range of departments (Bryan Roberts, 2005). A major source of business is concessions. These are 'shop-in-shops' which can be found in most Debenhams stores such as Young Fashion companies 'Oasis' and Ladieswear outlet 'Evans' (Steve Worthington, 2003) The company's innovation has proved successful by introducing branding into its menswear and ladies' wear lines. The 'Designers at Debenhams' include Jasper Conran, John Richmond, John Rocha, The Duffer of St. George and Betty Jackson ((Bryan Roberts, 2005). Debenhams operates 97 stores throughout the UK and Ireland, with seven international franchise stores (Nicholas Alexander, Barry Quinn, 2005). Debenhams is mainly focusing on a growth strategy investigating heavily in modernising and expanding its stores portfolio. Debenhams projects to have 106 domestic stores by the end of 2006. It has also changed its product mix and market positioning. The company is more emphasizing and focusing on fashion and introducing many new contemporarary designer brands and there own labels as well. In 2000/01 Debenhams superseded its competitors and gained its market share. Debenhams main emphasis is to create consumer demand for their variety of clothing in store, by attracting consumers in order to increases sales of high margin lines and bulk purchases. Designers at Debenhams: As the customers' demand for designer brands continues to grow with time, as a result of more awareness and wealth, designers at Debenhams offer aspirational merchandise contemporarily designed at affordable prices. These new ranges now offer even better value for money, and have an increasingly high profile throughout their stores. Currently Debenhams have over 26 designer brands in their stores which includes names such as "J" by Jasper Conran, "Pearce II Fionda" by Ren Pearce and Andrew Fionda, "Philip Treacy", "BDL" by Ben de Lisi, Lulu Guiness, and "G" by Maria Grachvogel. International brands: In total, Debenhams sells more than 500 international brands. Debenhams enjoys being the UK's number one retailer of many international brands, including "Estee Lauder", "Clinique and Clarins", "Meyer", "Portmerion and Viners-Oneida", "Ben Sherman", "Playtex and Lepel". Recently introduced brands include "Kickers", "Ted Baker Endurance and Morgan". Debenhams has a clear strategy to increase its future profitability and grow its market share. This is being achieved by increasing sales to the existing customers, moving into new markets, attracting new customers. Debenhams is enhancing its online sales services by upgrading its website to make its merchandise even more accessible Conclusion: Debenhams is more successful than Marks and Spencer as its market share is increasing and profit are also increasing. The stores offer a versatile collection of different brands with contempary designs to cater the demand of both young and old generation. Marks and Spencer on the other hand have lost a significant portion of its market share due to its unwillingness to outsource its production, and charging a higher price for its product. By the time Marks and Spencer realised this, it had lost significant portion of its market share and profit plunged to lower limits. References: Bryan Roberts, International Journal of Retail & Distribution Management Vol : 31 Issue: 7, Ahold and Tesco - a marriage made in heaven Cathy Hart, MALCOLM KIRKUP, Diane Preston, Mohammed Rafiq, Paul Walley, Cases in Retailing, 1997. Fort Worth Star-Telegram (Texas), May 24, 2006, Glynis Jones, Middle East expansion - the case of Debenhams, 2005 http://www.marks-and-spencer.co.uk Karen Barth, Nancy J. Karch, Kathleen Mclaughlin, Christiana Smith Shi; The McKinsey Quarterly, Global Retailing: Tempting Trouble, 2001 Marks & Spencer CEO: Keeping An Eye On Costs Marks & Spencer profit up 46.6 percent Nicholas Alexander, Barry Quinn, International retail divestment, International Journal of Retail & Distribution Management; Volume:30 Issue:2; 2002 Steve Worthington, Debenhams Middle East benefits from local understanding: The Sheiks' favorite department store, Strategic Direction; Volume:19 Issue:11; 2003 Wall Street Journal, The, 2006 www.debenhams.com www.edinburgharchitecture.co.uk/debenhams_edinburgh.htm Read More