That M&S had net sales of £100m in the markets last year might surprise the average UK shopper. After all, the fashion and home goods retailer has no presence in UK markets. But M&S’s international business is constantly building its position in Europe, Asia and the US across a wide range of markets. Why? And how?
Tom Flintoff, Head of Markets, International E-Commerce, at M&S, was the keynote speaker at Channel X World last week, where he shared insights into the retailer’s go-to-market strategy.
Why M&S sells in the markets
Market sales represent a very small part of M&S’s sales, which reached £10.9bn last year. Rather, Flintoff says, the retailer sees direct consumer sales growing along with market sales. For M&S, markets are essentially a brand awareness tool, and especially in markets where it has very little existing presence. “When we launched into markets in different regions, we saw some great data that suggests it’s working.” Flintoff says. “Searches for the M&S brand on Google are increasing. Our D2C sales increase. We really don’t see any reason, especially when we have such a low market share, not to continue with this approach.”
How M&S Approaches Markets
Currently, the retailer is in its first phase: test and learn. From here, you will move on to optimizing your business presence in the markets. Within three years of launching your markets business, or within two years, the goal is to make a profit. That, says Flintoff, will mean big changes in the way his business operates. “We definitely won’t stay in markets just for sales,” he says. “We have to take advantage of it, as I’m sure it applies to others.”
The approach begins with deciding which markets to sell on. The markets that M&S prioritizes meet the criteria, including whether you can win in that market and how big the prize will be for doing so. In Europe, for example, I would look for marketplaces that sell in more than one region, where you already have brand recognition, and initially focus on fashion. It currently sells on Zalando in Europe and Amazon in the US, but sells through many more in Asian markets, from Zalora in Southeast Asia to Myntra in India and beyond, operating through partner or franchise models. .
Then a decision must be made on which operating model to use in which regions. That could mean selling wholesale in the market or fulfilling the products themselves, either by direct shipping or stocking products in the region. In Indonesia, for example, products are shipped from the store.
“A small army of people” drives M&S’s presence in markets in a variety of regions, says Flintoff. “It’s really hard work to earn £100m.” The international market spends much of its time figuring out how to automate processes. But until now, many of them still work through manual tools, such as Excel spreadsheets, which are used to track the shares that are bought for different markets.
Getting the customer’s assortment is another of the main challenges. The retailer began by choosing lines that were selling well in the UK. In total, it has more than 150,000 fashion SKUs (Stock Keeping Units). But getting the assortment right has proven difficult. That’s harder when marketplaces don’t offer information about who buys from their platform, and easier when they do. “With a company like Zalando, we have a lot more information, you know, they have their own customer segmentation, based on fashion and metrics, so you can start really targeting whoever it is,” says Flintoff. “You start to realize that the GenZ customer is a broad customer base. There are many different aspects.” Now, he says, the retailer doesn’t focus on people or segments, but on life stage and fashion. “So we have to be clear about who we are targeting in our markets. And we just need to push the market as much as possible to get that information.”
Profitability is the ultimate challenge. But, says Flintoff, the decision that the business had three years to turn profitable gave him much more room to test and learn.
The last chance is to build thriving businesses beyond the UK that can offset tough times closer to home. “Europe is difficult,” says Flintoff, “but we would like to accelerate in Europe faster. That’s where the challenge is. But the Indian business is exceeding expectations. Southeast Asia, just an untapped opportunity. And I think those regions can more than make up for what we may be suffering here for the next 18 months.”