The British Go Shopping : Marks & Spencer Is Determined to Get Involved in U.S. Retailing
In his memoirs, Marcus Sief, former chairman of Marks & Spencer, recalled how a store manager once confronted a normally cheerful employee of 20 years’ service after noticing that she had suddenly turned gloomy and depressed.
After some prodding, the woman, a janitor, eventually confessed that a son she had struggled to put through college was about to get married in South America and neither he nor she could afford to pay her way there to attend.
Following consultations with senior managers, the problem was resolved.
She “was given a fortnight’s leave, her fare and expenses were paid and off she went to South America for her son’s wedding,” Sief noted.
The incident reflects the extraordinary paternalism and attention to detail that has helped transform Marks & Spencer from a small open market stall in a northern English industrial town a century ago into Britain’s sixth-largest company, with sales last year of $7.5 billion.
Historically an inward-looking, overtly patriotic, British company--it has always preferred British suppliers where possible--Marks & Spencer expanded into continental Europe and Canada during the mid-1970s.
And last month it prepared its first major entry into the U.S. market, offering to pay $720 million for the prestigious Brooks Bros. chain of clothing stores, now part of Federated Department Stores.
While the purchase hinges on Campeau Corp. winning its $6-billion takeover battle for Federated against R. H. Macy & Co., the British retailer has left little doubt that it plans to be a player in the American market, no matter what the outcome.
“If we lose Brooks Bros., we’ll look elsewhere,” Marks & Spencer spokesman Ronald Jacobson said. “We have made a commitment to the American market.”
Emphasizing good quality and reasonably priced clothing, together with attractive specialty food items and a variety of home furnishings, Marks & Spencer has struck an amazingly popular formula for consumers of all income brackets.
Its store near the Marble Arch on London’s famous Oxford Street holds a place in the Guinness Book of Records as “the department store with the fastest-moving stock in the world.”
Whether food, home furnishing or clothing, every item at Marks & Spencer is sold under one label: “St. Michael.”
The key to the chain’s remarkable success, those who have studied it maintain, has been its success in involving both its own employees and its suppliers in a consistent effort to maintain a high level of service and product excellence.
In a nation better known for bitter, combative labor-management relations, Marks & Spencer has made a fetish of staff loyalty, nurturing it into a highly effective competitive tool.
Sief’s cleaning woman tale is indicative of a company philosophy that provides above-average wages and fringe benefits that include chiropodist care for sales assistants’ tired feet, hot three-course meals for employees at a price of 60 cents and wedding gifts for anyone employed more than three years.
When senior managers discovered that many sales clerks spent their lunch hour at the hairdresser, the company built staff-only hairdressing facilities in the stores where women can also have lunch.
Competitors who once dismissed these perks as eccentric extravagances have recently begun to reassess their own methods.
Low Shoplifting Rates
For, aside from the fact that the firm has one of the lowest employee turnover rates of any British enterprise, consumer surveys consistently show that Marks & Spencer’s draw is linked in part to a customer service widely perceived as superior.
“Marks & Spencer is saying that you can compete on the quality of your human resources,” said Timothy Morris, a lecturer in organizational behavior at the London Business School who has studied the company’s unusual methods. “They say they compete on attention to detail, and they have everyone in the store looking out for it.”
Sales assistants, for example, are quick to let supervisors know if customers are asking for items not carried in the store, while floor staff vigilence is cited as one reason that shoplifting remains at a lower level than at competing stores.
“We may be soft,” Sief once told an executive from another company, “but look at our profits.”
Last year, those profits hit a record $780 million.
“Other large retailers rely on younger, casual employees,” Morris noted. “But they are suddenly realizing the potential of a committed, trained staff and are trying to compete on this level.”
Marks & Spencer produces none of its own products but has forged similar loyalties with its suppliers, who accept the chain’s sometimes unusual demands in return for substantial, reliable business.
On one occasion, Marks & Spencer refused to deal with a supplier until it improved toilet facilities for its own employees. In another instance, it cut off a meat-products supplier that refused to upgrade substandard conditions in those portions of its operation not involved in supplying Marks & Spencer.
However, suppliers who do qualify value the business for its security and reliability.
Family Roots
“They believe in longstanding relationships with suppliers and we value that,” noted R. C. Clark, chief executive of United Biscuits, a company that has dealt with Marks & Spencer for decades. “But they are demanding. At one stage, they carried out hygiene checks that were unique, but now others take a similar interest.”
The philosophy that set Marks & Spencer apart today stems from its origins as a tightly organized but benevolent family business, launched in the Yorkshire industrial city of Leeds by a Russian Jewish immigrant named Michael Marks.
In 1884, Marks opened a stall in the Leeds open market, borrowing the equivalent of $10 to buy stock, which he then sold for a penny an item.
The wholesaler who provided those initial goods, the Isaac Dewhirst company, remains a major supplier today.
The penny market idea caught on, and Thomas Spencer, a Yorkshire accountant employed by Dewhirst, eventually joined with Marks in a partnership, providing the capital required to finance what had become a rapidly expanding chain of stalls and shops.
By 1926, Marks & Spencer became a public company and, by 1930, it had more than 200 branches, selling mainly clothing and haberdashery items.
14 Million Customers a Week
By the time food products were added in the 1950s and home furnishings in the late 1970s, its reputation for good-quality products and strong service had transformed the experience of shopping at Marks & Spencer into a kind of national institution.
Using their rhyming slang, London’s Cockneys dubbed the chain “Marks & Sparks”--a name that became so widespread the company eventually registered it as a trademark, much as Coca-Cola did with “Coke.”
Last year, Marks & Spencer’s 264 stores in Britain collectively drew 14 million customers each week.
The company is currently involved in a 5-year, $1.8-billion program to transform its Spartan, cookie-cutter store interiors by upgrading carpets, expanding walkways and softening stark lighting to invite browsing as well as buying. There are few population centers left in Britain without a Marks & Spencer.
The company began looking at foreign prospects in the early 1970s and the initial overseas expansions produced mixed results.
In Canada, its first foreign venture in 1972, inexperience led to mistakes. It opened stores along older main streets even as high-quality stores were shifting to shopping malls. The no-frills surroundings of the stores, so successful in Britain, turned off Canadian shoppers, as did the selection of merchandise, which came mainly from traditional suppliers accustomed to catering to British tastes.
Following several major adjustments, the Marks & Spencer stores in Canada became profitable for the first time in 1986.
By contrast, the D’Allaird’s chain of executive women’s clothing stores and the Peoples Department Stories of Montreal, which Marks & Spencer later bought in Canada, have both performed profitably.
Collectively, Marks & Spencer now owns 200 stores in Canada, but those stores contributed less than 1% of total group profits last year.
In Europe, stores in France, Belgium and Ireland have done better, but remain a small part of the corporate picture, accounting in all for about 4% of profits.
Marks & Spencer made its first tentative entrance into the United States last year by opening three D’Allaird’s stores in Upstate New York, a move described by one company official as “a toe in the water.”
In London, financial analysts familiar with Marks & Spencer have reacted cautiously to the company’s offer for Brooks Bros., arguing that the price is high and the timing, with recession clouds gathering over the U.S. economy, is questionable.
The price of Marks & Spencer’s stock on the London Stock Exchange has dropped about 5% since the bid was announced.
“There is going to be some dilution of short-term earnings if the deal goes through,” noted Keith Wills, retail stores analyst for stockbroker Citicorp Scrimgeour Vickers & Co. “But it looks like a good strategic move in the long term. Potentially, they are a good match.”
