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SELFRIDGES, MARKS & SPENCER ENGINEER REVIVAL

BY SUSAN THORNE

Successful revivals of ailing retailers are the exception rather than the rule, but, recently, two well-known English merchants have dramatically reversed their fortunes.

Selfridges & Co. and Marks & Spencer are both long-standing retail institutions — the first is an upscale department store company, and the second is the leading British midpriced clothing retailer (which has also sold food in some stores), with a national chain of 323 junior department stores. Both brands had become tired by the mid-1990s. Marks in particular was coasting on its reputation.

Once upon a time Marks & Sparks, as it was affectionately known, was a trusted source for good quality, no-nonsense (if perhaps a bit conservative) clothing. It succeeded in attracting shoppers from all classes. Then, during the 1990s, it lost its grip. In an attempt to reinvent itself as a trendier store, quality went out the window and, according to many of its critics, so did good taste.

“Marks & Spencer had a lot in common with Gap,” said Richard Perks, senior retail analyst at Mintel Retail Intelligence, London. “There was a lot of complacency and corporate arrogance — they thought they could walk on water. They were losing track of the customer and putting too much emphasis on margin instead of quality and value.”

The company’s bottom line was eroded by competition from such mid- and value-market competitors as Gap, Matalan and Next. Between 1997 and the end of March 2001, Marks lost £500,000 ($868,725) in sales and 3.5 percent of market share in its nonfood merchandise (mostly apparel).

In 2000 newly appointed chairman Luc Vandevelde promised to turn the company around within two years. He commenced with a painful international downsizing, selling off or closing 38 European stores and discontinuing the catalog business. The company also sold stores it had acquired in North America, including Brooks Bros. and the Kings grocery store chain.

The company set out to streamline and consolidate its supply chain, replacing some suppliers. In place of the generic St. Michael label, new product lines were created in apparel (the biggest merchandise category) that targeted specific customer markets. The most important were Per Una, a women’s wear collection designed by George Davies, founder of rival chain Next; Perfect, a line of classic women’s styles; and Blue Harbour, a casual men’s wear collection unveiled in January 2002. (Marks sources claim that Blue Harbour now outsells any other male fashion line in the United Kingdom.)

This merchandise revamp made the crucial difference for Marks, according to Edward Whitefield, chairman of Management Horizons Europe, a London retail practice consulting firm.

“They redefined their brand personality, so that instead of an undifferentiated sea of skirts or trousers, there are now casual collections, smart fashions and sport collections,” Whitefield said. “They’re helping customers meet their lifestyles.”

For the value-minded, Marks announced an overall price reduction of 3.5 percent starting in March 2000. The store image was smartened with a $63 million refurbishing campaign in 2002 that added cafés to many stores and introduced “Classic” shops featuring merchandise for older shoppers. Staff commitment to improvement was and is an important aspect, said Bella Pagdin, a company spokeswoman.

“Mr. Vandevelde developed a statement of vision, mission and values, and everybody has a copy on his desk,” she said.

The changes began to pay off in late 2001, when sales rose 2.8 percent for July through September — the first rise in three years. Sales of the entire Marks group for the 12 months ended March 30, 2002 (the most recent numbers available) totaled $12 billion — up 3.8 percent over 2001. But more important, the year’s operating profit climbed by an impressive 30.8 percent to $993.4 million.

Selfridges & Co. was founded in London in 1909 by Harry Gordon Selfridge, a Wisconsin native who is credited with the saying, “The customer is always right.” For most of its existence it was a one-store company made up of the Oxford Street, London, department store, a place renowned for its delectable food, among other things. In 1998 a second unit was opened on the outskirts of Manchester.

Though well established, Selfridges had acquired a staid image associated with tradition rather than innovation. Unlike Marks, the Selfridges remake was not a case of rags to riches. The company was doing well all along, but simply decided that it needed to rework its concept. In the late 1990s, it did so. As with Marks, product change was the route to redefinition. Perennial brands like Aquascutum, Viyella and Jaeger, synonymous with an older generation, were supplemented with new, contemporary designer fashion labels like Adrienne Vittadini, DKNY and Ted Baker.

Harry Gordon Selfridge (not to mention his old-timer customers) wouldn’t recognize the new store. The younger merchandise and image is supported by celebrity evenings with such stars as Sting and Elton John, and by attention-getting promotions like the strip chess game (a presumably slower version of strip poker) conducted by a couple seated in a front window of the Oxford Street store.

The Oxford Street flagship store was reorganized into smaller, boutique-like areas of 300 to 500 square meters (3,228 to 5,381 square feet) dedicated to different brands and themed areas, such as the Intimate Apparel room, with its designer corsets and exclusive lingerie lines. There is a 2,000-square-meter sports area for active apparel and sports equipment; different wall and floor colors identify displays for a variety of sports. A technology hall includes displays of electronics merchandise, an HMV outlet and a hands-on science museum featuring high-tech gadgets. There are also concession stands and a bar that serves alcohol “so customers can chill out while they shop,” a company release says. The Food Hall, a Selfridges trademark, offers a selection of gourmet fresh and packaged food items.

The total effect, says Whitefield, is more like a shopping center than a department store.

“They carry 3,000 brands, which is more than most shopping centers,” he said. Selfridges’ renaissance is all the more remarkable, Whitefield notes, “because it comes at a time when department stores worldwide are breathing their last.” Selfridges sales have been healthy. Though fiscal 2002 figures were unavailable at press time, for the fiscal year ended Feb. 2, 2002, total sales for all Selfridges stores came to $64.3 million, up $16 million from the year before. And the numbers have continued to climb. In the 22 weeks to Jan. 4, 2003, same-store sales were up 7 percent year over year, while total sales jumped 14 percent.

The company is so energized that it is going into expansion mode. In addition to the second Manchester store that opened last September, another will open this year in the Birmingham (England) BullRing, and a Glasgow, Scotland, store is scheduled for 2007.

With Selfridges on an upward trajectory, Vittorio Raddice, CEO of the company since 1996, left the company at the end of February. His new post: He will head the home department of Marks & Spencer.

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