The M&S Playbook: 3 Ways Department Store King Recaptured Its Crown
When Marks & Spencer returned to the FTSE 100 Index in September after a four-year absence, it felt like confirmation that one of the UK’s most beloved brands had rediscovered its mojo. And its strategy for brick-and-mortar was a major part of that revival.
While peer and rival John Lewis continues to struggle for a clear pathway and several other department store brands have succumbed to economic and online pressure, M&S has gone back to its knitting under a no-nonsense management team that has looked for many of the answers to business success in what it used to do so well.
At the centre of Marks & Spencer’s recovery has been a rethinking of its legacy real estate portfolio, and while co-CEO Stuart Machin might moan that only closures are highlighted in the national media, M&S is accelerating the transformation of a lopsided portfolio that needed reshaping for the modern retail environment.
Bisnow took a deep dive into how the UK retail stalwart used stores to help turn around its fortunes.
In its most recent update, M&S reported food sales for the 13 weeks to 30 December up 10.5% at £2.3B, up 9.9% on a like-for-like basis, with clothing and home up 4.8% at £1.2B, representing an overall sales increase of 8.5%.
There are three key areas where M&S has repositioned itself to make its impressive comeback: stores, its omnichannel approach and management, an area that again has an impact on real estate.
The Store Network
M&S has revamped its offer and its stores at the same time. Fundamental to its recovery is the overhaul of its fashion offer as part of its Never the Same Again agenda, while during the five years of its current plan, it aims to grow its grocery market share from 3.6% to 4.6%.
Its store network, once a strength, had become a burden, and although it had closed 68 legacy stores by the end of 2022 and rolled out a new food format, its current programme has ramped up rotation of the store network. That means shutting the more poorly performing stores and focusing on opening or refurbishing stores in better locations.
M&S ultimately wants to reduce the number of full-line stores, which include food and fashion, from 247 at the end of 2022 to 180 modern stores by 2028. It also wants to add around 100 new Simply Food shops to grow to around 420 stores, largely in a refreshed 12K SF to 15K SF format.
“Until the late 1990s, that store network served M&S well, but the old real estate portfolio was not fit for purpose, and the rejuvenation programme going on now has been 20 years in the making,” Knight Frank partner and Head of Retail Research Stephen Springham said. “But the first thing to say is that this has been a product-led recovery. Real estate is one piece of the jigsaw.”
As part of its modernisation strategy, in November M&S launched what it said was its biggest-ever month of store openings, which included nine new stores at an investment of £80M, including a major new 65K SF store at Birmingham’s Bullring & Grand Central, plus full-line stores at Lakeside Shopping Centre in Thurrock and Manchester's The Trafford Centre as part of its circa £500M investment pledge last year.
New flagships feature the likes of a market-style food hall with sushi, curry, and pizza and pasta counters, plus new format M&S Café and even wine-tasting machines for Sparks loyalty card customers.
Meanwhile, the Food Hall Battersea, which opened in December, is trialling a range of innovations, including new checkouts and ways to pay, such as M&S mobile scan-and-shop technology.
As part of this headline investment, M&S relocated to new stores in Leeds' White Rose and Liverpool ONE last summer, an approach that has gone well with analysts.
“M&S is right to continue investing in stores, as consumers increasingly appreciate the experience of shopping in person again. It remains dedicated to remodelling existing locations — a much-needed investment, as many of its older stores look tired and outdated,” GlobalData senior analyst Pippa Stephens said in a note.
M&S announced in January that it will invest £30M in its Scottish sites, with new store openings and expansions planned over the next 18 months to include Dundee, Edinburgh, Largs, Linlithgow and a £15M investment at M&S Aberdeen Union Square, with the store almost doubling in size and due for completion by spring 2025. It will then close its St. Nicholas Street store in Aberdeen’s city centre.
The new shops mean M&S will have more than 15 stores across Scotland in its renewal format.
“We’re seeing the peripheral stores closed and regional consolidation putting the right store in the right place. That also means understanding the mix of general merchandise and food,” Springham said. “In terms of the full-line offer, the main opportunity for 80K SF to 100K SF showcases will probably come from out-of-town locations, mirroring the strategy of rival Next.”
For M&S, it is all about quality, not quantity. Machin and co-CEO Katie Bickerstaffe aim to get the five-year store rotation programme done in three years, by which time the space for clothing and home will have reduced by 1.7M SF, to 8.2M SF, while food will increase from 6M SF to 6.8M SF.
Omnichannel And Stores
M&S also wants to have the most convenient click-and-collect operations across the country, and by the end of the store rotation programme, it is on track to have more than 600 touchpoints for click-and-collect.
Leveraging its store network as fulfilment hubs has improved efficiency and flexibility, while over 155 stores now offer digital collection and return kiosks. Many Simply Food stores also send returns to hub stores for processing.
With around 30 million customers across the brand, the retailer launched its M&S Connect division at the start of 2023, headed by Director Kirsty Ward, to leverage its loyalty programmes across Sparks, M&S.com, Ocado and its credit card.
M&S Connect has focused on building what it calls a “single digital identity of its customers,” while former M&S.com boss Stephen Langford has been spearheading ways to improve how the retailer’s digital channels link with its stores.
New Management Team
There were eyebrows raised about the leadership restructure in 2022, which saw Machin become CEO and Bickerstaffe appointed co-CEO. But placing the company under joint control has allowed the duo to accelerate the five-year plan that Machin had already initiated in food and Bickerstaffe with clothing and online.
The middle-management headcount has been steadily reduced to improve efficiency as part of a pledge to cut costs by £400M over five years, while around two-thirds of its 150 top leaders are new to the business in the past five years.
This also has a real estate angle, as Machin has questioned the need for a major central London office. The lease at Paddington on its 237K SF Waterside House head office is due to expire in the retailer’s 2027-28 financial year, and Machin has mooted more flexible work through distributed hubs. In November, Brockton Everlast launched a consultation on a refurbishment and extension of the offices amid ongoing speculation that M&S will vacate the site.
M&S is also involved in a major row over its plans to demolish and rebuild its Oxford Street flagship as a new eco-store, and earlier in February, the company set out its case against the secretary of state’s decision to block the proposed redevelopment of its Marble Arch site.
In a statement, M&S Operations Director Sacha Berendji said the decision ignored advice from the independent planning inspector and support from Westminster City Council, the London mayor and the Greater London Authority, adding that it “misinterpreted and wrongly applied planning policy, with every one of the six counts we raised approved by the Court to proceed to this hearing.”
While M&S waits on the appeal, it is fast-tracking its store estate and reestablishing its position, especially in a sector where only Frasers and Next have nailed the department store format.
“It shouldn’t be underestimated how complex repositioning these stores is. It really is a location-by-location process,” Springham said. “But importantly, because they’ve got their retail offer in place, they have been able to execute the strategy with confidence and go on the front foot.”
