UK Retailer Marks & Spencer’s Revenue Results Smacked by Website Woes

Company promises improvements, but will they be in time?

4 min read
UK Retailer Marks & Spencer’s Revenue Results Smacked by Website Woes
Photo: Marks & Spencer

IT Hiccups of the Week

We concentrate this week’s edition of IT snarls, snags, and snafus on the lessons being learned the hard way by Marks & Spencer—the U.K.'s largest clothing retailer and one of the top five retailers in the country—on what happens when your online strategy goes awry. What makes this more than a run-of-the-mill website goes bad story, at least in the U.K., is that as London's Daily Mail put it late last year, “Marks & Spencer, to coin a phrase, is not just any shop. It is the British shop, as much a part of our cultural heritage as the Women’s Institute, the BBC and the Queen.”

M&S launched with great fanfare a new £150 million website in February as a primary means to stem declining sales and profitability, as well as accelerate the achievement of the 128–year old company’s objective of being an international multichannel retailer. However, last week, CEO Marc Bolland announced shortly before the company’s annual meeting that on-going “settling in” problems with its website contributed to an 8.1 percent drop in online sales over the previous quarter. The decline in online sales, which was more than expected, helped M&S chalk up its 12th quarter in a row of declining sales in its housewares and clothing division.

Bolland reiterated a statement he initially made in May that the company expected that website issues would still negatively impact online sales until the 2014 holiday season, an admission that shareholders no doubt were still unhappy to hear. Share prices in M&S have declined some 20 points to the mid-420's on the London exchange since late May.

Paradoxically, Bolland also insisted to RetailWeek that despite the admitted negative impact on online sales that the new website has caused, “there is no problem with our new website.”  M&S Chairman Robert Swannell further tried to put a positive spin on the situation at the annual meeting, according to a story at City A.M. While granting that “every project of this scale will cause some disruption,” Swannell contended that the new website had, in fact, created the “newest and biggest flagship store, open to everyone, 365 days a year.” Alan Stewart, the company’s finance director, even went so far as to claim at the annual meeting that nothing “had gone wrong” with the website’s launch. In May, the London Telegraph reported, Stewart set out to trivialize the website problems M&S customers were complaining about, comparing the problems as being similar to going to a supermarket where the milk has been moved, and not being able to immediately finding it. Stewart repeated the misplaced milk analogy at the annual meeting, which was probably not a good idea since it didn’t go over well with M&S online shoppers the first time.

M&S customers (and shareholders) can be forgiven for being more than a bit jaded after hearing the three executives’ upbeat utterances at the annual meeting. It's especially forgivable knowing that the company spent three years to develop and test the website, all the while promising a unique as well as reliable shopping experience. Yet, within days of the website’s 18 February launch, it crashed spectacularly. Some M&S customers were so angry, the Daily Mail reported at the time, that they promised to boycott M&S until the old website, which was operated by Amazon for the previous seven years, was brought back. M&S executives seem to have conveniently forgotten about that incident in their "no problems with the website" remarks last week.

While the website crash was exasperating, adding to M&S online customers’ angst was the discovery that they would have to re-register their personal credentials on the new site. Perhaps a minor annoyance in the general scheme of things, except that many long-time customers reported that they were having (and continue to have) difficulties re-registering.  In fact, M&S admits that only half of the previously 6 million registered customers have re-registered on its new site.

Of course, the 3 million who haven’t re-registered may have decided it wasn’t worth the effort.  According to the Guardian, things are so bad that many M&S online shoppers are giving up on using the new site because they view it as being “tricky to use” and “unfriendly.” Customers have complained, among other things, that searching for M&S products have proven not only to be clumsy and slow to perform, but also erroneous. Adding to shoppers’ frustration is the fact that a non-trivial amount of merchandise offered for sale online seems to be tagged as being “out of stock.”

In May, an article in the Economist indicated that Bolland blamed the current merchandise stocking issues on a “15-year legacy of not investing” in IT and logistics by the company’s previous management. Shareholders might want to ask, then, what was the outcome of the company’s £400 million IT investment strategy begun in 2009 specifically aimed at improving IT and logistics? Was the investment strategy a complete bust?

M&S doesn’t have a lot of time to overcome its existing customers’ exasperation with its website, as well as begin the process of wooing new customers to it. If the site isn’t fixed before the holiday season as promised and it continues to be a drag on company revenue, shareholders may lose patience with the company’s management and call for their resignations. M&S executives may have decided to beat shareholders to the punch, however.

Soon after the poor quarterly results were declared at the annual meeting, M&S announced that its financial director Alan Stewart had decided to “defect” to rival U.K. retailer Tesco.  Financial analysts told the Financial Times that the move was not a good sign: It may be an indication that despite all of Stewart’s positive talk, he was really “not optimistic about the success of the turnaround at M&S.”

Maybe Stewart’s misplaced milk actually really is out of stock, and no one knows how to re-order it.

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