Ordinary Gweilo

I have to admit that I have been following the events at Marks & Spencer with some interest. For many years M&S was hugely successful and very profitable, with an enviable reputation for good quality and reasonable prices. Then competition started getting tougher and profits fell, and the unthinkable happened – it became possible that the company could be taken over.

Now we have something of a soap opera. Four years ago, Philip decided that he would like to add M&S to his collection of retail outlets, but he ended up dropping his offer and the company brought in Luc from Belgium to be the chairman, and Roger the management consultant to be the chief executive. Luc’s other new friends included George (who had built up one of M&S’s most formidable competitors before being forced out, and created a new brand for M&S about 3 years ago), and Vittorio (the big-money signing from Selfridges). Luc made a promising start, but then (rather like England in their game against Japan) he seemed to lose interest fairly quickly, whilst no-one was ever sure whether Roger was up to the job, and the deal with George seemed to be good for him but maybe not so good for M&S

After the recovery faltered, there was pressure to bring in a more high-profile chairman. Stuart, who had spent 17 years at M&S before making his name elsewhere, was the favourite amongst those mysterious people ‘in the City’, but the general view was that Roger would last about 5 minutes if this happened (and George and Vittorio might have a few problems), and it appeared that the board were reluctant to make such a radical change.

Then Philip told all his friends in the City that he was going to make another bid, so M&S decided to ditch both Luc and Roger and bring in Stuart, but as chief executive rather than chairman. This seems to have upset Philip, according to The Daily Telegraph, and when he spotted Stuart arriving at the M&S headquarters they had a brief, er, discussion:

Philip told his driver to stop, and he leapt out of his car and crossed the road. Stuart’s car had parked, and suddenly there was Philip to open Stuart’s door. Caroline, Stuart’s driver, was absolutely speechless. ‘Oi! I want a word with you’, Philip told Stuart. Then he dragged Stuart out of the car by his suit lapels.” Philip Green began shouting and swearing at M&S’s new chief executive, jabbing his finger into Stuart Rose’s chest.

“He told Stuart that his behaviour was disgraceful and he’d behaved very badly. Philip said: “You could’ve been an owner, not just running M&S. He yelled that Stuart would rue the day that he’d taken the [chief executive] job.”

According to the Telegraph, the two had met a few weeks earlier, but nothing had been agreed. It’s not clear whether they had discussed a package that might have included equity in M&S, but Stuart jumped at the chance of taking the job of chief executive (and the reputed ‘golden handshake’ of over a million pounds), whilst Philip pushed ahead with his bid. However, the response from shareholders has not been positive and the M&S board were quick to reject it as inadequate.

It’s not hard to see why Philip Green might be unhappy. If M&S escapes his clutches again that will be frustrating, but if Stuart Rose also manages to turn the business round, that will also be bad for Green’s other retail businesses (particularly BHS). Although The Guardian’s account of the same incident suggests that it might have been fairly light-hearted, it seems to have reinforced Green’s image as something of a wild man. He is probably better suited to running a private company rather than one quoted on the stock exchange.

So what went wrong with M&S? Well, it has never exactly been ‘cutting edge’, but did build up a formidable reputation for reasonable prices and good quality whilst traditional rivals such as BHS and C&A struggled (Philip Green has since revived BHS, but C&A has gone from the High Street). However, for quite some time M&S has been facing stronger competition from newer competitors such as Next and Gap in clothing, and the supermarkets for food. Last time I was in a branch of M&S in the UK (admittedly on a weekday morning), the average age of the customers seemed to be well over 60. Younger customers seem to find other shops more attractive, and that has been causing a lot of concern to M&S management and shareholders.

The dilemma is that making the stores too trendy and fashionable could drive away the older customers. There are already complaints that the company has alienated long-time customers by messing around with classic designs and failing to maintain high standards of quality. The disappearance of the ‘St Michael’ brand name and the switch from British to overseas suppliers have also eroded some of the traditional strengths of M&S. Why buy a garment made in China from M&S when its competitors have something very similar for a lower price?

Interestingly, M&S seems to have a different image in Hong Kong – it is perceived as being more upmarket and less dowdy, and at one time they were able to sell at higher prices than in the UK and still be seen as offering good value for money, but prices elsewhere have fallen and they have had to compete. This forced them to cut costs by reducing management overheads and shrinking some of their bigger but less successful stores (normally by giving up one of the two floors, as they did in Festival Walk and Plaza Hollywood). They also seem to have far more sales and other special promotions.

My biggest complaint about M&S in Hong Kong concerns the food department. They have an unfortunate habit of introducing products that then immediately disappear again. It’s not clear whether they are too popular (and disappear off the shelves) or not popular enough, but I get frustrated when I find an item I like and then can’t buy it again. What makes it worse is that they have such a small selection that it’s hardly worth going there on the off-chance – if I go there to buy two or three items and none are available I probably won’t bother next time. Sort it out, Stuart!