Sample Undergraduate 2:1 Marketing Analysis

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Market Analysis of Marks & Spencer Clothing

Table of Contents

1.0 Company Overview

2.0 Competitive Retail Environment

3.0 Internal Analysis

4.0 External Analysis

5.0 Competitors

6.0 Conclusion

7.0 References

1.0 Company Overview

  Marks & Spencer Group. (referred as M&S forthwith) is a British multinational retailer that primarily sells clothing, food products to a variety of markets.  Established in 1884, the brand now operates 959 stores in the UK, with over 400 worldwide (Marks & Spencer, 2019). Within this M&S operate their own clothing brand which accounts for over 30% of all sales (Marks & Spencer’s, 2019). Targeted primarily towards British customers, the brand aims itself at a variety of age groups of both genders through both in-store and online stores. Marks & Spencer’s operates as an ethically responsible retailer which has helped the brand differentiate against the rise of low-cost competition within the UK retail market. Plan A, the companies corporate social responsibility programme has positioned the brand as a trustworthy retailer in responsible sourcing, waste-reduction and community care (Marks & Spencer, 2019).

  However, despite these strengths, the brand is suffering heavy losses due to increasing financial pressures from increased online competition and a weakened British high-street (Eley, 2019).  Online brands like ASOS and Boohoo have changed how fashion is sold and brands like M&S have failed to adapt to the new changing market. As a result of this, in 2018, it was confirmed that over 100 stores would close in a ‘radical’ plan to restructure the company to remain financially competitive (Marks & Spencer, 2019). This report will carry out a full internal and external analysis to help understand the position Marks & Spencer’s are currently in and their future position.

2.0 Competitive Retail Environment

  Online retail has emerged as the new competition within the UK clothing sector with brands like M&S suffering due to a shift in customer’s expectations and demands. As of 2018, M&S remains the UK’s largest clothing retailer on the high-street with a market-share of 19% (Mintel, 2018). However, despite this, the brand failed to grow in comparison to high-street brands Primark and Next who grew to 7.1% and 6.9% respectively in under a year, to both hold 16% of the market (Butler, 2018). Compare this to the online competition, where ASOS announced in 2017 they overtook M&S’s UK market-value by 2% (Wood, 2017). This was achieved in less than three years, which demonstrates the change in shopping habits for UK customers. Analysts predict that 40% of all clothes shopping will be carried out online by 2025 (Mintel, 2018).

  Brands like ASOS and Boohoo are currently dominating with their ability to offer lower-prices due to not having to factor in brick-and-mortar retail costs. These costs are crippling the British high-street, with Brexit fears and rising rents all leading to many British high-street brands collapsing (Sommers, 2018). However, despite these worries, Primark is one of the few retailers continuing to grow, with the brand expected to take 20% of the market by 2020 (Butler, 2018).

  Customers shopping habits have changed, with brands like ASOS and Next capturing the younger 18-35yo market with their fast0fashion trend (Mintel, 2018). More traditional mid-market customers form the basis of M&S customers; however, this market is increasingly shrinking (Mintel, 2018). By 2019, the 18-35 market will be expected to form 24% of total fashion spend in the UK (Mintel, 2018).

Fast-Fashion forms the newest UK trend, with 66% of all online clothing traffic (Mintel, 2018). Social media and celebrities are pushing athleisure-wear brands, with retailers like ASOS offering overnight delivery to meet the demands of customers. Advantages which M&S are failing to meet with their more-traditional retail model. However, despite these growths online, only 15% of shoppers buy everything online (Mintel, 2018). Highlighting that there are still opportunities for a joined-up shopping experience of instore and online.

3.0 Internal Analysis

  For examining the internal environment both a SWOT and VRIN analysis allow for the identification of resources an organisation can exploit (Johnson, Whittington, Regner, Scholes & Angwin, 2017:115). A SWOT allows for; Strengths, Weaknesses, Opportunities and Threats to be identified (Johnson, et al, 2017: 115). Figure 1 is the SWOT analysis:

Figure 1: SWOT Analysis Marks & Spencer

Strengths

Weaknesses

  1. Strong offerings in the kids-wear, bra and footwear clothing segment.
  2. Strong e-commerce infrastructure
  3. Highly effective Corporate Social Responsibility – Plan A strategy
  4. Strong focus on the customer experience both instore and online
  1. Poor yearly financial performance
  2. Too heavy reliance on UK market – vulnerable to market conditions i.e. Brexit.
  3. Closure of 100 store by 2022 which lowers high-street position
  4. Frequent product recalls lead to loss of consumer confidence

Opportunities

Threats

  1. Plans to invest heavily in online infrastructure
  2. Reshape clothing segment to meet new trends
  3. Simplify operating model – faster turnaround from design to sale instore
  1. Stiff competition from online; ASOS and Amazon
  2. Stiff competition on high-street from Next
  3. Depreciation of sterling post-Brexit
  4. Changing trends in clothing segment

Source: Marks & Spencer, 2019

  The SWOT analysis shows M&S currently has some key strengths within the clothing segment. The brand continues to remain market leader in kids-wear, bra’s and footwear categories (Mintel, 2018). However, despite this advantage, the brand continues to post poor yearly financials (Wood, 2018). This is due to the brand having a loyal customer base with young mothers and women aged between 45-64 (Mintel, 2018). However, this segment is shrinking as younger customers are seeking online brands like ASOS and Amazon. Also, despite strong sales within certain categories, M&S has come under fire for many clothing options suffering from frequent product recalls and as a result losing customer confidence (Wood & Butler. 2019).

  Furthermore, M&S area traditional brand that are deeply rooted in a presence on the high-street. As a result, the brand has failed to adapt to new customer expectations of online stores and apps. This has led to M&S being vulnerable to market conditions like Brexit and having to announce the closure of 100 stores to remain financially competitive.

  However, despites these weaknesses and threats the brand still holds a number of opportunities. Firstly, a strength M&S has is their strong Corporate Social Responsibility with their Plan-A strategy (Marks & Spencer, 2019) M&S ethically sources and manufactures their clothes which acts as a competitive advantage against the low-cost competition. If the brand takes this advantage and focuses on investing their online services, there is an opportunity to stand out amongst the unethical fast-fashion brands. Finally, M&S have consistently won awards for their strong customer experience (Drapers, 2019). The brand needs to simplify their operating model which will allow them faster turnaround from manufacturing to sale instore. This will allow the brand to meet the demands of changing fashion trends quickly and use their customer service to meet the opportunities for a joined-up shopping experience (Mintel, 2018).

  A VRIN analysis allows for an inventory to be made of all the resources an organisation has. Resources are marked as valuable, rare, inimitable and non-substitutable (Johnson, et al, 2017: 107). Figure 2 shows that M&S has access to a number of tangible resources that can be classed as valuable. However, the difficulty for the brand is that very few are rare and can be copied by the competition. The key resource M&S has is their brand name and reputation. As a historical British company, the brand has a set of core-competences that aren’t easily imitated and help M&S stand out against the new online competition.

Figure 2: VRIN Analysis of M&S Clothing

Capabilities/Resources

Valuable

Rare

Initiable

Non-Substitutable

Corporate Social Responsibility

YES

NO

NO

NO

Customer loyalty

YES

NO

NO

NO

Reputation

YES

YES

YES

YES

Amount of retail stores

YES

NO

NO

NO

Skilled workforce

YES

NO

NO

NO

Powerful brand name

YES

YES

YES

YES

Source: Marks & Spencer, 2019

4.0 External Analysis

  A PESTLE analysis is a tool that allows for an organisation to identify external environmental threats that could affect M&S’s business going forward. The tool is made up of six factors; Political, Economic, Social, Technological, Legal and Environmental (Johnson, et al, 2017: 34).

Figure 3: PESTLE Analysis Marks & Spencer

Political

Economical

  1. Reduction in sourcing costs due to Free Trade Policy
  2. Brexit impacts on the cost of business
  3. Changing government and taxation policies
  1. Conflict with manufacturers over product price due to currency impact of Brexit
  2. Increasing high-street costs in rent and store upkeep

Social

Technological

  1. Initiatives supporting the surrounding communities to help cut down internal costs
  2. Product recalls creates negative social trend with customers
  3. Social media flak due to falling behind trends
  1. Failure to update technological standards both instore and online.
  2. Not meeting demands for social media presence.

Legal

Environmental

  1. Legal dispute over store rents with landlords
  1. Environmentally friendly and sustainably sourced products.

Source: Marks & Spencer, 2019; Hancock, 2019; Mintel, 2018.

  Examining the current political environment first, M&S is heavily reliant on the high-street for its main source of revenue. However, with political uncertainty arisen since the decision to remove Britain from the EU; M&S is currently facing instability. The brand relies heavily on free trade policies for their import and export of products around the world (Hobbs, 2016). Brexit is creating rising costs in the country with many businesses choosing to leave for economic reasons (Conway, 2019). These economic reasons are impacting M&S, with conflict over manufacturers about rising manufacturing prices due to fluctuations in the Sterling (Conway, 2019). As a result, consumer shopping confidence has dropped to an all-time low on the British high-street due to uncertainty about prices (YouGov, 2019). Furthermore, Brexit is also impacting on high-street rents and store upkeep, with landlords uncertain about the viability of the high-street against rising online competition (Butler, 2019).

  This social uncertainty has led to M&S receiving a lot of social media flack due to customers not believing the brand is able to remain competitive and loss of confidence in their products and brand name (Marks & Spencer, 2019). This has stemmed from the series of controversial product recalls from their ethically sourced clothing ranges which M&S failed to handle properly over social media, leaving loyal customers disappointed with the direction the brand is taking (Hancock, 2019).

  Further issues for the M&S are their lack of adapting to modern technological retail standards. Brands like ASOS and Amazon offer digital changing rooms and Instagram shopping apps to name a few, all of which appeal to the 18-35 age groups (Mintel, 2018). Younger shoppers are doing more shopping online and are seeking digital conveniences through their clothing brands (Mintel, 2018). M&S have failed to capitalise on this both instore and online, despite their brand being voted highly for customer service (Drapers, 2019). The brand is segmented between a more-traditional older demographic who are happy with the brand, while the younger, higher-spenders are seeing the M&S brand as old fashioned (Mintel, 2018). 

5.0 Competitors

  To explore the competitive environment M&S operate in, Porter’s Five Forces model allows for the analysis of the industry’s attractiveness by looking at the five competitive forces that can impact it (Porter, 2004: 47). Figure 4 shows the five forces and the following section will examine how they affect M&S’s current and future strategy.

Figure 4: Porter’s Five Forces

Diagram of Porters Five Forces

Threat of Entry: LOW: Traditional barriers to new businesses like high investment to create a high-street presence and the need for initial purchase of product to fill these stores help secure M&S’s current position. For online however, the entry requirements are much lower. However, brand names carry a lot of weight with where shoppers go (Park & Lennon. 2009). M&S has a longstanding traditional brand name that remains strong. However, this is set to change with emerging online competition from brands like ASOS and Boohoo who appeal to a younger demographic.

Threat of Substitutes: HIGH: While threats of new high-street businesses may be low, M&S are facing intense competition from online brands. Established brands like Amazon and ASOS are using competitive pricing and incentives like free delivery to undercut the traditional retail brands like M&S and Next (Monaghan, 2017). As a result, customers are going to these brands as they find it easier to purchase from them. M&S will need to redevelop their online services to meet the new demands from younger customers.

Bargaining Power of Buyers: HIGH: Customers are very disloyal to brands, especially the younger demographic whofocus on the lowest price or discounts when it comes to buying clothing options (Singh & Khan, 2012). Furthermore, with Brexit hitting high-street brands many stores focus on deep discounts or incentives to attract customers (Partington, 2019). As a result, M&S are facing difficult decisions into how they keep their customers loyal. In 2016 the brand launched its ‘SPARKS’ card as a loyalty programme to keep customers returning (Marks & Spencer, 2019). Along with earning points on shopping, the card allowed customers exclusive discounts. However, despite this, the discounts failed to match online offerings like ASOS who regularly promote up to 30% off brands, a benefit M&S cannot economically afford (Mintel, 2018).

Bargaining Power of Suppliers: LOW: Unlike customers, suppliers who deal with M&S have a heavily reduced bargaining power over price, quality and delivery terms (Porter, 2004: 48). With easy access to overseas suppliers, M&S can easily switch seamlessly from one supplier to the next if needed.

Although, this may become a future issue for the brand with Brexit looming. New deals and agreements will need to be made, and while M&S has a range of choice, the brand will have to create new bargaining deals to meet the changing economic climate.

Rivalry among Existing Competitors: HIGH: This remains a huge issue for the brand with competitors like ASOS set to overtake M&S within the next year or two (Monaghan, 2017). As highlighted throughout this report, to survive, the brand will need to restructure their clothing line to meet these new demands and expectations from customers.

6.0 Conclusion

  In conclusion, M&S have lost its strategic focus since market dominance in the mid-nineties (Marks & Spencer, 2018). The market has evolved to demand fast-fashion clothing and M&S are currently failing to meet those demands from a younger customer demographic. Furthermore, even though the brand has a loyal customer base amongst older shoppers the brand has suffered huge setbacks over recent product recalls. These recalls, along with poor social media communication have weakened the market position of M&S clothing on both the high street and online. Reputation plays a huge part in where customer choose to shop, and M&S are currently not utilising theirs to the full advantage.

  However, as the SWOT analysis shows. The brand has opportunities to capitalise on based on the strengths of the brand. The Plan-A sustainable clothing range has a lot of opportunity, especially with ethical manufacturing being a key future trend in clothing (Global Data Retail, 2019). Furthermore, the brand continues to win awards in customer service, which with the movement for customers towards a joint-experience model, M&S can capitalise on using its instore and online product offerings better. However, careful investment into a better online experience is required, as well as innovations with their product ranges. All of this is needed urgently if the brand is to maintain a competitive advantage.

7.0 References

Butler, S. (2018) Primark primed to overtake Next as UK's No 2. clothing retailer. The Guardian Business. [Online] Available at: https://www.theguardian.com/business/2018/jan/18/primark-primed-overtake-next-uk-no-2-clothing-retailer [Accessed 21/07/19].

Conway, E. (2019) Japan’s ambassador warns more firms could leave UK over Brexit. Sky News. [Online] Available at: https://news.sky.com/story/japan-issues-corporate-warning-over-no-deal-brexit-11655086 [Accessed 23/07/19].

Drapers (2019) Drapers Awards 2019 – Marks & Spencer. Drapers. [Online] Available at: https://awards.drapersonline.com/marks-spencer [Accessed: 22/07/19].

Eley, J. (2019) Marks and Spencer profits hit by heavy costs of turnaround. Financial Times. [Online] Available at: https://www.ft.com/content/6760502e-7bd0-11e9-81d2-f785092ab560 [Accessed: 21/07/19].

Global Data Retail. (2019) Fashion retailers cannot afford to ignore sustainability. Retail Insight Network. [Online] Available at: https://www.retail-insight-network.com/comment/sustainable-fashion-2019/ [Accessed 24/07/19].

Hancock, A. (2019) Marks and Spencer loses fourth clothing boss in a decade. Financial Times. [Online] Available at: https://www.ft.com/content/88bdcf04-a3ed-11e9-974c-ad1c6ab5efd1 [Accessed 23/07/19].

Johnson, G., Whittington, R., Regner, P., Scholes, K., and Angwin, D. (2017) Exploring Strategy: Text and Cases. 11th Edition. London: Pearson Education.

Marks & Spencer (2019) Annual Report 2019. Marks and Spencer. [Online] Available at: https://corporate.marksandspencer.com/documents/msar-2019/full-annual-report.pdf [Accessed: 21/07/19].

Mintel. (2018) Clothing Retailing-UK-October 2018. Mintel. [Online] Available at: https://store.mintel.com/clothing-retailing-uk-october-2018 [Accessed 22/07/19].

Monaghan, A. (2017) ASOS poised to overtake M&S in 'seminal moment' for UK fashion. The Guardian. [Online] Available from: https://www.theguardian.com/business/2017/aug/30/asos-poised-overtake-ms-marks-spencer-seminal-moment-uk-fashion [Accessed 23/07/19].

Park, M., and Lennon, S. J. (2009) Brand name and promotion in online shopping contexts. Journal of Fashion Marketing and Management. 13 (2), pp. 149-160. [Online] Available at: https://www.emerald.com/insight/content/doi/10.1108/13612020910957680/full/html?journalCode=jfmm [Accessed 23/07/19].

Partington, R. (2019) High street discounts boost struggling retailers as Brexit nears. The Guardian. [Online] Available at: https://www.theguardian.com/business/2019/feb/15/high-street-discounts-boost-struggling-retailers-brexit [Accessed 23/07/19].

Porter, M. (2004) The Competitive Strategy: Techniques for Analysing Industries and Competitors. 3rd Edition. USA: Free Press.

Singh, R., and Khan, I, A., (2012) An approach to increase customer retention and loyalty in B2C world. International Journal of Scientific Research Publications. 2 (6), pp. 1-5. [Online] Available at: http://www.ijsrp.org/research_paper_jun2012/ijsrp-June-2012-40.pdf [Accessed 23/07/19].

Sommers, J. (2018) Britain’s High Street in Crisis as Two Household Names Collapse on the Same Day. Huffpost. [Online] Available at: https://www.huffingtonpost.co.uk/entry/uk-high-street-maplin-toys-r-us_uk_5a968f33e4b07dffeb6e1509? [Accessed 22/07/19].

Wood, Z. (2017). M&S profits dive by nearly two-thirds as clothing sales slide. The Guardian. [Online] Available at: https://www.theguardian.com/business/2017/may/24/m-and-s-profits-clothing-sales-restructuring [Accessed 21/07/19].

Wood, Z. (2018) Marks & Spencer reports sharp drop in annual profits. The Guardian. [Online] Available at: https://www.theguardian.com/business/2018/may/23/marks-and-spencer-reports-sharp-drop-in-annual-profits [Accessed 22/07/19].

Wood, Z., and Butler, S. (2019) 'Jeansgate' exposes Marks and Spencer's deeper fashion flaw. The Guardian. [Online] Available at: https://www.theguardian.com/business/2019/jul/13/jeansgate-exposes-marks-and-spencers-deeper-fashion-flaw [Accessed 22/07/19].

YouGov. (2019) Consumer confidence at five-year low as Brexit concerns persist. YouGov. [Online] Available at: https://yougov.co.uk/topics/finance/articles-reports/2019/01/29/consumer-confidence-five-year-low-brexit-concerns- [Accessed 23/07/19].

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