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Marks & Spencer

Marks & Spencer is one of UK’s leading retailers of clothing, foods,

household goods and financial services serving 10 million customers a
week in over 300 stores in UK. The company also trades in over 30
countries worldwide through a network of around 544 stores. It has a
group turnover exceeding 8 Billion Pound sterling. Its stores are located in
UK, Ireland and Hong Kong and through franchises worldwide. In USA it
operates the Kings Super Markets.
The History
The company started in 1884 when Michael Marks, a Russian – born
Polish refugee opened a stall at Leeds Kirkgate Market. Since he could not
speak English, Marks laid out all of his merchandise into two groups and
placed all those items costing a penny in one section and those costing
more in the other. Signage board above the penny section read ‘Don’t ask
the price, it’s a penny’. Marks targeted north England. The driving factor
for this being that north England represented the transformation of Britain
from an agrarian economy to an industrial economy.
Initially, Marks avoided keeping any accounts. A single fixed price
helped Marks in keeping all his calculations simple. The fixed price policy,
however, put pressure on Marks to search a variety of high quality goods
that could be sold for a penny.
In 1893, Marks moved to Manchester. The next year he opened a shop in
the lower part of the building, 20 Cheetham Hill Road.
With the rapid growth in the business, Marks realized the limitations of
managing it alone. He began to search for a partner to share
responsibilities and established a partnership with Tom Spencer. Thus was
formed Marks & Spencer on September28, 1894. Tom Spencer was a
former cashier from the wholesale company I.J.Dewhirst. In 1897, M&S
shifted its Headquarters from Wigan to Manchester.
In the first decade of its operations, M&S outlets showed spectacular
growths. The management of three supervisors was in charge of visiting
the bazaars, taking stocks, supervising staff, expenditure, layout and
correcting deficiencies wherever found.
The Period 1907-1928
Marks died in 1907. In 1916 his son Simon became the chairman. By
then M&S was a comprehensive variety retail chain.
London Penny Bazar Co. was a major competitor for M&S. In 1914
M&S bought it for 15000 Pounds cash. This move helped M&S consolidate
its position in London. After World War I, influenced by the competitors
charging one dollar, M&S introduced the five-shilling price limit. In the
Chairman’s words,” The primary objective of the new merchandising policy

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was to discover, and where necessary create, a range and variety of goods,
which had not been previously available at this price”. In 1920s, the
company adopted the revolutionary policy of buying directly from
manufacturers. In 1926, the company started selling textiles and in the
same year it went public. Two years later, M&S launched its famous
St.Michael brand.

YEAR CITY NUMBER OF

OUTLETS
1900 North, South England, London 36
1903 North, South England, London 40
1907 North, South England, London 64

The Period 1928-1940

With the adoption of the new pricing and the resultant merchandising
policy, there was a reduction in the range and variety of the merchandise
offered at M&S stores. M&S shifted focus to high quality offerings and
reduction in costs. From 1928 to 1932 over 70% of the items listed in the
1926 Brochure disappeared from the stores. The limited range of
merchandise enabled M&S to increase the degree of specialization and make
quicker response to customer demand. This policy gave M&S stores a very
special position in the retail sector and by the mid-1930s the company had
become the largest retailer of textile products in Britain and Europe. In
1931, a food department was introduced selling produce and canned goods.
Throughout the 1930s the sale of Textiles continued to grow and the
turnover multiplied more than three times between 1933 and 1939.
In 1930s, the company also introduced Café Bars in many stores.
These provided cheap, hygienic and nutritious mass catering. This was a
valuable resource during the war, making efficient use of scarce food.
In 1934, a scientific research lab was established headed by Dr.Eric
Kann. This was the first research lab of any British retailer, allowing the
company to pioneer new fabrics.
The Period 1950-1980
By 1956, all goods were sold under St.Michael label. In 1956 the first
St.Michael branded chocolate was sold. In 1959, M&S became the first
retailer to introduce the ‘No Smoking’ rule in the stores.
In 1964 Simon’s brother-in-law, Israel Sieff, became the chairman. It
was during this period, from 1962 to 1972, that the company recorded a
spectacular growth. The profit before taxes was almost 12% on sales,
considered highly satisfactory in retailing business. In 1965, M&S launched
a major initiative to improve quality. Major stores were advised to send to
the head office any defective goods either identified by M&S staff or
returned by customers. After classifying the defects, manufacturers were
invited to take a look at the defective merchandise. The exercise sent clear

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signals to manufacturers regarding the retailers’ commitment to quality. In
1972, clothing sales accounted for almost 75% of M&S total sales.
In 1974, Indian and Chinese food items were introduced with dishes
like Chicken Korma and Lamb Rogan Josh.
In 1985, M&S Charge card was launched nationally. In 1986, the first
edge of town store opened at the Metro Centre in Gateshead. During this
time, furniture was added to the merchandise. This was supported by the
Home Furnishing catalogue.
1990s and the Present
By 1990, M&S had 266 stores around the world. M&S adopted the
policy of laying out all the merchandise for the customers to choose from
(self service). It has been acknowledged by M&S that most retailers
compete with one another in terms of quality of merchandise, shopping
convenience, displays, range of product lines and Brand Portfolios. M&S
depended on its team of designers working closely with the suppliers to
create its own range of products. With the advent of new Textile materials
in ‘30s and ‘40s the company reacted by changing its product designs. Its
textile technologists and merchandisers ensured consumer representation
at every stage of production.
M&S offered only one brand St.Michael, while other retailers offered a
range of brands to their customers. This limited the choice with customers
but M&S felt that benefits outweighed costs. As a writer mentioned, ‘To
M&S the issue is not so much a matter of choice as such, but rather
whether or not the product in question can really satisfy the customer’s
needs’. The company assured customers that the products sold under the
Brand name St.Michael were produced in accordance with the company’s
specifications on both materials and manufacturing methods. In spite of
the high quality of St.Michael merchandise, the company adopted a ‘no
question asked’ refund policy.
M&S arrived at a price within the reach of the customer,
independent of the current costs and selling prices. M&S then tried to find
ways to develop products at a cost that could generate profits. M&S
created the best advertising slogan”Don’t ask the price, it’s a penny”. The
St.Michael brand name ranked among the most reputed brands of the
world.
Product and Merchandise Management
The buying team at the Head Office takes decisions regarding
introduction of new products. The buying team, consisting of a selector, a
merchandiser, a technologist and a quality controller, develops the product
idea based on the interpretation of customer needs. The team studies
materials, manufacturing processes required and sales volume projections
at different stages of product life cycle. The product is test marketed and, if
found upto the mark, launched. Once launched, the company ensures

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product availability in sufficient quantities at its stores for complete
customer acceptance.
M&S constantly reviews its product lines and regularly upgrades its
merchandise. The slow moving product lines are removed. The store makes
a ‘fortnightly check list’ which provides sales information on all products.
This effectively determines the performance of respective merchandise.
M&S always maintains direct link with manufacturers. It analyzed
that these manufacturers were not producing quality products in sufficient
quantities at realistic prices to attract customers. M&S solved the problem
by linking together mass manufacturing with mass retailing to serve the
customers effectively and efficiently. M&S is known as manufacturer
without factories and its manufacturers as retailers without stores. M&S
established a Production Engineering Department in 1947. It helps
manufacturers modernize their processes by giving advice on factory
administration, layout and any production problems.
M&S has experienced that lower prices could increase sales 8-10
times. High volumes enable M&S to place orders on a large scale. This
helps manufacturers to plan ahead for long runs for better economies.
Scientists and technologists at M&S are fully integrated into the
business and are active members of the buying department. The team of
scientists has modernized laboratories where new materials, processes and
finished goods are being developed. Most of M&S merchandise is produced
in Britain. It also procures clothing from other countries when the required
quality is not available indigenously.
M&S has sometimes been criticized for using its strong bargaining
power to squeeze margins of manufacturers. M&S however maintains that
it has a cooperative relationship with suppliers and helped them reduce
their costs. A senior M&S executive was quoted “Our suppliers have a
responsibility to produce high quality merchandise for us. This merchandise
will sell freely due to its good value. We also have an equal responsibility to
our manufacturers to ensure that if he is efficient, he makes a profit. The
manufacturers plough back these profits into their business to buy the
latest machinery, pay proper wages, implement decent staff amenities,
introduce newest technologies, expand their manufacturing facilities to
meet our increasing requirements and pay their shareholders”. Although
M&S did not directly invest in manufacturing, it invested substantially in
technical support, management advice, educational processes, to bring the
manufacturers outlook and operations in line with that of M&S. One
manufacturers remarked ”When you tell someone that you supply to M&S,
they look at you with a new respect because they know that you have to
be good”.
M&S’ specialized buying came to be known as ‘Specification Buying’.
M&S insists that the manufacturers work according to M&S’ list of detailed
specifications of the materials and processes employed. The task is carried

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out by the technologist in the buying team who works closely with
manufacturer’s technical personnel. When the production process begins,
two perfect product specimens are sealed, one is sent to the manufacturer
and the second remains with M&S. The company rates a slightest deviation
from the specification as a reject. M&S also encourages new ideas and
improvements from its manufacturers.
In recent years M&S has invested significantly in sophisticated IT
infrastructure capable of supporting the needs of both its staff and its
customers.
In 2003, M&S had a turnover of 7066 million pound sterling from its UK
operations and 681.3 million pound sterling from its international division.
The Operating Profits from UK operations was 631.9 million pound while
the international retail division contributed 43.5 million pound.

QUESTIONS

1. Analyze M&S’s key aspects of Merchandising strategies.

2. Analyze M&S’ Brand positioning with respect to its Merchandising
strategies
3. Discuss M&S’s policy of its private label.
4. Analyze the evolution of Product Mix strategy for M&S establishing
Customer loyalty.
5. Comment on the Mission of M&S to acquire leadership position in
retail Business.
6. Critically analyze M&S relationship with its manufacturers.