25th October 2018
Amazon Q3 retail sales “surprisingly weak”
While American voters were confounding practically all observers on November 8, on the other side of the Atlantic Britain’s Marks & Spencer unveiled a strategy that may be designed for a post-Brexit, post-Trump world.
On the surface, it seemed the standard announcement we’ve seen from large apparel chains all year: domestic store count to be cut short-term around 5-10%, with a few apparently high-profile closures in its relatively recent – and disappointing – overseas expansion. Similar, it seemed, to Gap’s recent series of cuts: stores closed at home, followed by Old Navy pulling out of Japan earlier Banana Republic being pulled from the UK in October.
Retailers aren’t just making announcements about downsizing right now, though
M&S’ announcement wasn’t a straightforward downsizing programme either. It involved closing almost all its loss-making self-owned stores outside the British Isles, and all operations in eight of the 50 or so countries where it operates. But it also envisaged a net longer term store increase domestically and expanded joint ventures and franchises overseas.
In Europe, apparel may not be central to M&S ambitions…
What really grabbed the headlines was one intended closure of what one newspaper called the company’s “flagship on the Champs-Élysées, the prestigious shopping street in the centre of Paris”
“Prestigious” to foreign tourists maybe. But a “flagship”? A pokey shop with a history of repeated short tenancies (Esprit lasted just two years there), and simply hopeless for showing off apparel ranges?
Whatever M&S’ Champs Elysees branch was supposed to be doing in the internet age, it – and the other French stores M&S is closing – certainly wasn’t showing off the stuff the remaining M&S network around Paris actually sells.
Which is food.
Not any food, as its advertising is constantly telling Brits, but M&S food. To see the company’s full, distinctive, range of ready to eat food, properly displayed for Parisians to take home or back to their office desks, you’d have to traipse out to the decidedly un-chic mall at La Defense office complex, four miles away.
M&S food-dominant stores often also include click, fit & collect facilities for the full apparel range and a highly edited onsite middle of the road convenience apparel collection.
It seems obvious that the area around Paris (nearer by train to the M&S London head office than Britain’s other big cities) is just as suited for this format as the suburbs of Edinburgh, Dublin or most other big European cities.
The logistics of short-life food retailing in Northwestern Europe depend on the EU’s barrier-free borders, so the viability of cross-European short-life food operations depends on the precise details of Britain’s exit from the EU – unlikely to be settled for another two years. If the post-EU settlement permits, M&S’ operations on mainland Europe are likely to be centred on food.
…but outside Europe: apparel still reigns
The rapidly growing – and profitable – M&S brick & mortar operations outside Europe are likely to evolve in a quite different way
Those stores are dominated by middle of the road apparel and longer-life, recognisably British, food like tea and jam that don’t demand sophisticated delivery systems. In many markets – like India , the Gulf and Hong Kong – there’s a real following for the distinctive niche M&S has carved out.
M&S has a wide enough offering to tailors its formats – store and website – to individual countries’ different local quirks. Like many UK chains that once had big, ultimately unsuccessful, plans for the US, it’s unlikely to return to North America for a while – but as Primark, Victoria’s Secret, Walmart and Amazon are showing, few apparel retailers are letting recent problems with international limit their ambitions to their home country.
No major retailer with wider interests will keep North America, Japan and Brazil off its radar for future development – but as Primark and Amazon also show, there’s no reason operations everywhere must consist of both online and store
Do Trump and Brexit change all that?
The growing antipathy to the present system of global trade was visible throughout the US election – but hasn’t kept shoppers from H&M, Primark and Zara.
Like many voters in the US election, many apparel chains don’t see the past few years of overseas expansion as altogether positive. But they can’t unmake the world outside their home country, and if they’re going to be successful in future, their plans must involve much contact with the rest of the world.
Whatever their rhetoric, neither Trump nor Brexit advocates really want their country locked away from the world – but both the UK government and the new US Administration are determined to change the regulations controlling how their countries trade with everyone else.
The real challenge for apparel businesses isn’t how loudly they can complain about Trump or Brexit: it’s adapting their global plans to the changing political environment. After all, what’s marked the apparel industry winners from the losers is how well they’ve adapted to the changing shopping environment over the past 20 years,