Marks and Spencer 2016 Annual Report Download - page 16

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MARKS AND SPENCER GROUP PLC
STRATEGIC REPORT
OVERVIEW
From a high earlier in the year, consumer
confi dence declined at the tail end of the
year as competing factors played on
people’s minds. On the one hand, the
building blocks of the UK economy have
remained solid: house prices have risen,
interest rates have remained low and
unemployment has fallen. On the other
hand, numerous macro factors have
generated wariness. Uncertainty over the
upcoming EU referendum has caused
people to feel unsettled. Cracks in the
global economy and fears over terrorism
have also weighed on sentiment.
These di ering perspectives were refl ected
in our CIU research. While customers told
us they were feeling more optimistic about
their personal fi nancial situation, they
were simultaneously feeling more cautious
about the wider economic situation. This
limited what they were prepared to spend.
UK FOOD
Growth in the UK food market has been
sluggish this year due to the highly
competitive market, and the discounters
continued to grow market share. However,
our Food division had another strong year,
with sales continuing to grow ahead of the
market. Our customers told us they love
M&S food for being special and di erent,
and our performance saw our market share
strengthen from 4.1% to 4.3%.
Customers told us that newness is really
important to them and we continued to
innovate, introducing 1,700 lines over the
year. In an increasingly homogenised
market, our quality and uniqueness are
crucial points of di erence.
Events remained signifi cant for us, from
seasonal celebrations like Christmas,
where we saw record sales in the week
leading up to Christmas Day, and Mother’s
Day, where we had record sales, to special
occasions like a family barbecue. Last
summer’s Tastes of the British Isles range
celebrated our food’s provenance. This
resonated with customers – sales rose
26% compared to the equivalent range
in the previous year.
UK CLOTHING & HOME
The UK clothing market grew slowly this
year, up 1.4%. In an already competitive
market, the high street faced additional
pressures from intense promotional activity
and di cult weather patterns – it was wet
in the summer and warm in the autumn.
Our Clothing division was a ected by
both these factors, and sales fell by 2.2%.
However, our customers also told us that
many of the problems were self-infl icted.
Too many shoppers found it hard to locate
what they were looking for in our stores.
They also said they could not rely on M&S
for their core wardrobe pieces. We are
listening to our customers and work is
underway to set this right. Customers
continued to be impressed by our service;
our store employees were recognised for
being helpful and polite, and the overall
service measure in our customer
satisfaction survey was the highest ever.
HOW OUR UK CUSTOMERS SHOP
How consumers shop continues to change.
Britons are the biggest buyers of clothes
online in Europe. Furthermore, they are
shopping across di erent channels like
never before. Today’s shopper may browse
on a tablet and buy on a desktop computer,
or research on a mobile and purchase on
a laptop. Dual-screening in the evening,
where customers are watching television
whilst shopping on their tablet, has become
the norm.
As a connected retailer, we need to be
as adaptable as our customers. Our
research shows that tablets are particularly
signifi cant, with tablet ownership at 48% for
35-50 year olds.
Sales through tablets and mobiles grew
by 28% and 85% respectively. Customers
said they fi nd our sites inspirational, with
intuitive designs and great photography.
60% of M&S.com sales are delivered
through our Shop Your Way service where
customers collect their order in store.
This has increased by 2% on last year,
showing that convenience counts.
Customers also told us they want ranges
tailored to their shopping needs and in
convenient locations. Our diverse store
portfolio is well set up to meet this need,
whether customers are shopping for
dinner that evening in a railway station
Simply Food or visiting one of our town
centre Food Halls in preparation for
a special event.
Technology does not just increase
convenience – it also allows personalisation.
Our Sparks membership club allows us
to tailor o ers to our most loyal customers,
rewarding them with points in the process.
We continue to improve the personalisation
of our approach to ensure that it o ers
members something distinct from
traditional loyalty schemes.
INTERNATIONAL
A challenging global environment of
unfavourable currency movements, falling
commodity prices, geopolitical unrest
and a faltering Chinese economy impacted
our international profi ts. We are working
on understanding more about our
international customers. However, we do
know recognition of the M&S brand is
strong overseas and the international M&S
London logo is viewed as representing a
stylish Britishness that resonates well. Sales
showed our food is celebrated overseas.
We are operating in changing times, so it is crucial that we listen to our customers
and keep a close eye on global trends. Our Customer Insight Unit (CIU) analyses
responses from 60,000 customers per month. By combining their views with detailed
market research and customer analytics, we can identify what is infl uencing
shopping behaviour and ensure we stay relevant to our customers.
OUR PERFORMANCE
MARKETPLACE
-15
-10
-5
0
5
10
DNOSAJJMAMF
2014
J DNOSAJJMAMF
2015
JMF
2016
J
D
2013
N
CONSUMER CONFIDENCE INDEX