Marks and Spencer Marketing Analysis - Case Study Example

Introduction The focal point of this report is UK’s fifth largest retailer, Marks and Spencer which is also known as M & S. This report constitutes of four major sections. The first section provides a summarised overview of the company, its offering and the markets that are being catered by the company. In the second section, the competitor’s analysis is done. The third section deals with the value adding activities that the company is indulged in and how are they maintaining their web presence. The last section which is followed by a conclusion deals with the consumer experience of the company’s website and will also look at how competitors are using the same medium in comparison. Description of the company In the United Kingdom, M & S is currently ranked as the fourth largest retailer, with sales of GBP 8733 million (Press Association, 2012). The best offerings of the company are wide line of clothing products and designer food products. Globally, M & S is known for its famous clothing lines. In 2012, the group turnover was GBP 9934 million with net income of GBP 490 million. As of today, 81223 employees are being hired by the company with 1010 stores operating worldwide (Beisada, 2012). Products and Services Marks and Spencer offers a diversified and a wide range of goods and services to its customers. The best known is of course clothing that includes menswear, women and kids. M & S is also currently dealing in technology products, furniture and luxury food range. The company is also offering different furnishings for all type of wooden furniture, decors, kitchen utensils and electrical devices. The food product range includes different eatables, chocolates and natural farm fresh food. M & S is also offering financial services and this project has only started in 2011 (Marks & Spencer, 2011). The company also has collaboration with Scottish and Southern and they are providing energy solutions and home insulation products (Brady, 2012). Markets, target customers & supply chain M & S is at the end of the conventional supply chain with its stores directly facing the customers. It can be easily termed as a Business to Customer (B2C) Company because customers directly interact with M & S and not the producers. M & S in 2007 started a program known as Plan A with the aim of increasing the environmental sustainability of the company. The most important feature of this plan was to reduce the share of full service vendors by 35% and increase the share of directing ordering to 65% till the year 2015. This is a very good example of disintermediation which means that intermediaries aren’t customer focused. This enabled M & S to sell products directly to the customers and reap profits (Chaffey, 2011). Through M & S position itself as a brand for all, the major target audience is customers above the age of 25 with some acceptable income. M & S also targets the opinion leaders and has also started the ‘only available at’ campaign for some renowned brands although it’s still in the experimental phase (M&S-History, n.d.). Analysis of Competitors We will identify M & S’s main competitors and will compare them. We will also discuss the driving forces behind M & S’s successful online operations. These forces include the complete e-commerce strategy of M & S, the role of international commerce and other marketing activities initiated by M & S to enhance growth (Michael, 1998). Main Competitors Since M & S deals in different product lines, it has many competitors. The main competitors of M & S in clothing line business are Debenhams, House of Fraser and BHS. In the food product line, the main competitors are Sainsbury’s and Waitrose. However, based on business research company ‘Hoover’s’ analytics, the main competitors of M & S are JLP, Debenhams and House of Fraser (Debenhams, 2011). Comparison of M & S competitor’s The biggest competitor of M & S in UK is Waitrose supermarkets owned by John Lewis Partnership (JLP) (Partnership, 2012). JLP itself is the largest employee owned retailer and Waitrose Limited forms its food retail department (Lewis, n.d.). Waitrose currently has 282 supermarkets, 30 convenience stores and 4.5% market share, placing it 6th on the list of grocery retailers in the UK. Waitrose owns only half as many stores as M & S in the UK, though, its statistics are impressive. JLP currently generates revenue of GBP 9.5 billion which is very near to M & S revenues of GBP 9.93 billions. While M & S generates profits of GBP 6 billions, the figures for JLP come down to GBP 4.10 billions. Of these three competitors, JLP hires the most number of employees which is 84700, roughly 3000 more than M & S. The company offer trustworthy and reliable brands and the group also now have the distinction of having the best high street website after beating M & S in the competition in October 2010. The second competitor of M& S is Debenhams who has 171 stores in United Kingdom, Ireland and Denmark. Debenhams employs 29000 people as of 2011, and have revenue of GBP 2.2 billion with net income amounting to GBP 1.2 billions (Debenhams-History, 2012). Debenhams is almost 100 years older than M & S and was founded in 1778. Debenhams have a rich history of acquisitions and have acquired famous brands such as Harvey Nichols. The target market of Debenhams is women aged over 25 and men over 30. The company is also operating in 26 countries with 73 franchise stores (Debenhams-Overview, 2012). The third competitor worthy of mentioning is House of Fraser which is a premium British department store. The profits of the store are around GBP 37.2 millions and the company has around 60 stores in UK and Ireland. The company employs around 6500 people and targets SEC class B and C1 (HouseofFraser-About, 2012). They offer same products as M & S, apart from food and wine (HouseofFraser, 2011). Threats for Competition Since M & S deals in many product lines and categories, it’s difficult to study the whole size of its business and for simplification; we will only apply Porter’s Five Forces Analysis on the premier business of M & S which is the clothing lines. The logic for picking M & S’s clothing line is simple; it’s the only business for which M & S has a larger market share and faces stringent competition (Michael, 2008). A) - Threats of new entrants The clothing industry in the UK is already in the saturated mode; therefore the danger of new entrants is average. The only way an entrant can get into the market is by lowering their prices and thus, the profits. B) - Threats of substitute products Fashion industry and to cloth is a basic need of humans. Therefore, there is no real fear of substitute products. M & S knows that only determinant in this industry is to bring clothes that suffice to new fashion trends. C) - Buyers bargaining power Fashion industry has a very high power of buyers. The number of competitors in the industry is large and therefore, the customers have a lot of options to select from. This means that customers have full control on their choices which fulfil their desire. D) - Suppliers bargaining power Suppliers don’t have real power in the clothing industries. This is because of the fact that there are many suppliers all over the world. Retailers like M & S don’t actually worry about supplier since the pool is a very large one. In fact, it’s the retailers who dictate terms to the supplier (Mortimer, 2011). Suppliers by most retailers are presumed to be business partners and are expected to contribute by large retailers. E) - Industry Competitors The competition in the fashion industry is boisterous not only because of the existence of many retailers but because of different styles and trends as well. The problem with M & S is their price because they serve the high end target audience. Other retailers such as Mango, Debenhams and Zara have the same offerings at lesser prices which makes them a formidable competitor. E-commerce Drivers The UK association quotes that the online sales grow by almost 14% per year and the overall volume of the market is GBP 50 billion. The market is lucrative and saves cost; therefore M & S opened its first online store in 1999. The website has gone through many enhancements in the recent years although they lost the title of being best high street website in 2011. This online sales model has contributed greatly to direct sales which have seen growth in the recent years. The main business objective of M & S is to be a leading international multichannel retailer. M & S initially started making sales all over the globe through its UK office but soon realised that this strategy won’t effective in the longer run. They switched to the acclaimed ‘bricks and clicks’ model in which they now carry out sales from their stores locations in a foreign country. This decentralisation of stores means that these newer online shops transact in national currency and have locals as workers on the store. Value Analysis This section will look in depth at the ‘bricks and clicks’ strategy currently being adopted by M & S, the services they are offering and different customer channels they are dealing with. Bricks and Clicks The strategy adopted by M & S is strictly ‘bricks and clicks’. Both goods and services are available in physical shops and on the web as well in form of online stores. These online stores have proved to be tremendous customer retention strategy but on the same note, had negative effects on traditional shops. Deloitte estimates that almost 40% of such shops will disappear if online sales continue to grow in this manner (Kollewe, 2012). To counter this situation, M & S has introduced a new strategy through which they have made collection shops for online stores. These stores not only serve as a platform for different customers to interact but also provide a way for marketing products to potential customers (Katona & Sarvary, 2007). Sales through multi – channels The 703 stores of Marks and Spencer in the UK can be divided into high street stores, premier stores, major stores, outlets and food shops. Out of these 703 stores, almost one -fourth these stores which are food shops are franchised stores. The other three-fourth stores are owned and managed by M & S. Online shops cater to all the offerings of M & S, be it products or services. The customers can access this facility by means of phone or a fully mobile enabled website. The customer after placing the order has two options; he/she can either pick the deliverable from an order shop or he/she can have it delivered to their address. As far as efforts on social media are concerned, M & S have pages on Facebook and Twitter with 280,000 and 27,000 followers respectively. M & S also carry on different BTL activities like they published a home catalogue which received around 1000 television spots with 900,000 clicks for buy. Value Adding Activities We will examine the value configuration of M & S business model by utilising Porter’s proposed value chain model. The analysis of activities and value added activities that increases the worth of M & S business are analysed in detail. These activities that increase M & S net worth can be broadly categorised into two divisions: Primary activities and Support activities. A – Primary activities The Porter’s value chain model categorises selling and marketing activities as primary activities. This means that the whole sales, marketing, distribution and operations lie under this realm. If we apply this model on M & S and have a detailed look at its supply chain, we realise that M & S inbound logistics receive goods from 2000 global vendors. M & S began using RFID’s tagging in 2004 when they would tag every men suit with a RFID tag (Partridge, 2007). The outbound logistics department is responsible for distributing customer orders either to their address or the nearest store location. In some countries, where M & S don’t have established supply chains, partners are responsible for performing functions of distribution, packaging and labeling. As far as marketing campaigns are concerned they primarily focus at increasing the value of already established brand name. As far as servicing and retailing is concerned, M & S provide bulk discounts and personalised servicing to different sets of customers. B – Support Activities According to the Porter’s value chain model, the support activities of a company are technology, human resources, administration and procurement. With respect to procurement, M & S wisely acquired ‘theitindex.co.uk’ in 2006 to procure IT products through an efficient mechanism (ITR-Portal, 2006). M & S is one company that believes in adopting technology for business benefits, that’s why the fully integrated supplier platform for auto-generated order and invoice processing. A value added network is in place that connects 2000 suppliers via an electronic data exchange to the SAP ERP module of Materials Management. A simple web interface suffices suppliers to connect to M&S. Website Evaluation The most important success factor of any online business is the traffic generated from its website. Traffic is only generated for those websites who have a rich user experience. The nearest competitor for M & S in all businesses and approach is JLP and we will compare and contrast both of them using the Constantinides framework (Constantinides, 2004, 111-126). Functional Factors The functional factors of M & S website can be divided into usability and interactivity. The sites navigation and architecture comes under the usability factors whereas addressing customers after sales and customer interaction comes under the interactivity part. Usability Factors Architecture wise both the websites are similar. The main pages are divided into a header, footer and content. Important elements are highlighted and can be recognised at the first glance. JLP’s navigation is better to understand because it’s alphabetically arranged. The search bar on M& S is predictive whereas in terms of JLP it’s not. JLP customers have enough time to select from the pop -up menu whereas the pop-up menu of M & S disappears in a flash without allowing the visitor to select from it. JLP checkout doesn’t require a previous registration but M & S does. M & S provides ‘one – click ordering’ services to the customers once they get registered into the system. Both these sites offer features for disabled and impaired users like zoom, tabbed browsing and html versions for non – flash and non – javascript users. M & S has been even conforming to WCAG standards (Lemos, 2012). Interactivity Customers are able to rate and comment about products on both the website. This can lead to negative word of mouth as some customer reviews are enough to damage a brand’s name. Customer reviews can easily be shared on Facebook or Twitter which could also have catastrophic effects for example “ #McDstories ” and cause PR nightmare. Customer services is provided via multiple channels by both brands, however JLP is more forthcoming it with contact details. M&S’s website resides an FAQ section, along with return and refund policy (M&S-Privacy, 2012). Cross selling is employed by brands. As far as privacy and cookies information is concerned, JLP even analyze cookies to extract customer insights and analytics. Psychological Factors: e-Trust Trust is the pivotal factor in online business. Since there are a lot of brands that both the websites have on offer, they offer varied number of payment methods which are highly trusted by the customers. JLP claims that they comply with data protection methods and personal information confidentiality methods in their privacy policy sections. Visa and MasterCard secure payments for both the websites which also provides information about Distance Selling regulations. M & S also comply with all data protection laws and abide by them. Transactions on M & S websites are highly secured as they are done over secure socket layer. Moreover, M & S is an ISIS accredited retailer and has a verified domain name. Content Factors M &S’s major offering is in clothing and luxury food. These articles are presented to the online buyers in a tasteful manner by employing E-marketing mix strategies. The website offers minimalistic look with clean user interface and ease of navigate, however it doesn’t follow the 5 ± 2 rules. Neutral use of corporate colors is practiced. Website is highly responsive and offers consistency across pages. Appropriate visual cues are employed, promotional banners and offer placements are made to attract attention of visitors; increasing stickiness of the webpage. Products are cataloged according to brands labels and categories making it a well-organised website. Product offerings are supplemented with detailed description to aid purchase. Purchases can be carted, add to wish-list or enable one-click ordering; all the while easing and assisting unobstructed shopping experience. Product placement is done in trickled manner enabling visitors to visit value or sales pages first. Delivery options are highlighted to foster inclination via multiple options. M&S doesn’t position itself as a premium brand however it doesn’t associate itself as value brand either. Catering across spectrum enables M&S to expand its consumer base. The pricing is done accordingly. Online stores offer more promotions and discounts compare to its outlets, especially during holiday season to ease the number of walk-ins at retails. A conscious effort is made by M&S to not to promote price reductions on edibles as ‘Sale’ or ‘discounts’; rather they are tagged as ‘saving’ and ‘token of appreciation’ to positively reinforce buying inclination in visitors (Rigby, 2011). Pricing not done relative to its other current offerings such as upcoming product lines and already running discount offers. Even though online store bids many offers unabashedly but it doesn’t do so by compromising or diluting its brand equity and jeopardising its brand image. Performance of the website The servers of M & S are able to handle page views requests of over 1,000,000 page views. These servers are located in Amazon’s data centre in Ireland. An average user at least clicks around 8 pages before leaving the site and there are 85,000 such visitors every single day. In contrast, JLP has more visitors, (92,000) to be precise but the number of pages visited is lower to 5.5 pages. In terms of subpages, JLP has a large website constituting 112,000 subpages whereas M & S only has 35000 pages, so in this context M & S has an engaging website. Due to international orientation, M & S is ranked 4000 worldwide and JLP’s rank is 4082 but insider UK, JLP has a higher ranking than M & S. According to Alexa, M & S generates higher traffic than JLP and performance tests have always shown M & S to be faster than JLP. Conclusion and Recommendations M&S has an extensive accessibility policy where they tested their website following very strict standards and provides utmost consideration to people with disabilities. The accessibility tab is available at the bottom left corner across the webpage for use, if a need arise. The consistency and mapping of the website makes it easy to navigate and commit fewer errors. All information is made particularly visible and categorised under relevant labels making it highly organised and increases its familiarity and generalisation. To consummate, M&S’s standing in apparel market is extremely cutthroat. Due to the achieved economies of scale and well managed supply chain, M&S has been able to produce superior quality apparel with in competitive prices. M&S’s brand awareness and recall coupled with mentioned benefits comprises of its value proposition. In the context of value configuration, M&S focuses on its “bricks & clicks” strategy and offers services across different customer channels. The brand itself and the provided services are M&S’s main value adding activities. The storefront is designed to portray a very chic look while accommodating all required features. Despite the navigation popup bug, M&S’s website is robust enough to keep up with its competitors or surpass them. In attempt to expand its consumer base and tap into neglected/un-catered target market efforts are being made to combine the virtual and physical shops e.g. by free store collection of online purchased orders. Finally, M&S should stick to its e-commerce strategy to become a leading international multichannel retailer and thus reduce the UK market dependency and benefit from fast developing markets like China. M&S can harvest much more profit margins by localising their websites according to region of operation (this include customising beyond language option. Using local and culture sensitive images and tag lines) and offer cross sell and up-sell recommendations to the buyers. In-store stock availability updates can regular the foot count in stores that translates into purchase. And lastly addition of a public forum may enable M&S to create a two-way relationship with its customers and gather insights firsthand. References Beisada, A. 2012. Hoovers United Kingdom (UK). [ONLINE] Available at: http://www.hoovers.com/house-of-fraser/--ID__90209--/freeuk-co-factsheet.xhtml. [Accessed 15 March 13]. Brady, M. 2012. Video Case Study: Marks & Spencer. [ONLINE] Available at: http://www.gxs.co.uk/customers/customer_success/case_studies/video-case-study-marks-and-spencer. [Accessed 15 March 13]. Chaffey, D. 2011. 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