Should Marks & Spencer be scared?

All eyes will be on Marks & Spencer next week when it updates on second quarter trading. And as chairman Sir Stuart Rose has been bigging up food boss John Dixon recently, it will be interesting to see what progress has been made.

One analyst expects food gross margins to remain lacklustre, but does see an uplift in the second half as the retailer’s investments into food pricing are fully annualised.

M&S investment into pricing and promotions has given its food business strength. Promotions such as Wise Buys and Dine in for 2 for £10 helped pull in shoppers and while those deals would mean it has had to take a margin hit, they have helped with its image. Shoppers are looking for bargains and M&S is not a place where anyone would previously have looked for bargains. But the deals that Dixon has created have helped given it some value credentials.

M&S food also outperforms in its busy train and commuter areas – the Simply Food heartland. And this is now the area where M&S has serious competition, as Waitrose yesterday declared it was embarking on a major expansion of convenience shops sized between 2,000 sq ft and 4,000 sq ft.

Waitrose has already trialled slightly larger convenience stores. It has four shops of between 5,000 sq ft and 7,000 sq ft and now wants to get into more locations, with a target list of 300. The grocer said there are currently 6.5 million potential customers who are not easily able to access Waitrose and it is gunning for these extra sales.

Waitrose has been going great guns all year – last week reporting operating profit up 18.7% in its half year results – and is now well and truly stepping on M&S territory.

Waitrose has also been gaining market share at the expense of M&S and its convenience push will further this, unless M&S can strongly fight back.

At the moment, Simply Food rules the upmarket convenience sector. It has great products, a good range, and provides busy travellers with everything they could want.

But Waitrose also has great products and a good range. We are yet to see what the Waitrose format will look like at 2,000 sq ft but it will probably be level pegging with M&S. What this means is price wars on a local level.

And as convenience shops don’t generally breed loyalty, it will be the grocer with the sharpest promotion that wins. Whether this means the shops will be successful is another matter.