Comment: Marks & Spencer - Last mover advantage?

It is usually the first mover who grabs the prize, not the last. But could it be to Marks & Spencer’s advantage that it is building a new operating platform just as its core customer base is moving rapidly online?

The introduction to yesterday afternoon’s M&S’s multichannel seminar for analysts was from Tony Stockill, the head of ecommerce consultant Javelin (which is chaired by the legendary retail veteran Geoff Mulcahy), and he made clear that M&S is only the ninth biggest online retailer in the UK, despite its leading market share in clothing and footwear. The top 10 is headed by mighty Amazon, followed by Tesco and Argos.

But the great etail game is not over: in fact, it has hardly yet begun, with the digital revolution (in the form of the boom in sales of tablet PCs and smartphones) rapidly changing the way that consumers shop. Online competition is just a click away, but if M&S can get it right, in terms of the new multichannel business approach spearheaded by Laura Wade-Gery, then the prize is large.

In some ways, it is surprising how well M&S is doing already in online retailing, given its antiquated distribution infrastructure and reliance on legacy Amazon systems, which were built for selling books not clothing and footwear. Nevertheless, M&S claims to be number three in the online market in the UK in this space, with a 6% share, versus its 11% of the clothing and footwear market in total.

So, despite getting bad marks from customers for its delivery proposition and stock availability, M&S is already making useful inroads into the online market, which must reflect the goodwill towards the M&S brand and the robust functionality of the basic Amazon platform.

Interestingly, the fastest growing M&S online customer demographic is the so-called ‘affluent female’, typically aged between 55 and 65. In marketing speak, these ‘elegant suburbans’ represent 20% of M&S’s womenswear sales and they are already big owners of digital technology, with 52% owning a smartphone and 35% owning a tablet PC.

To keep these high-spending core multichannel customers and attract more of them, M&S will have to keep innovating and improving its online shopping experience. So it is good to see that M&S was also involved with sponsoring yesterday’s ‘Fashion Decoded’ conference in London, which aims to get the best creative talent in our very own ‘Silicon Valley’ in London’s Shoreditch area to work on revolutionising fashion retailing. M&S already has a dedicated team working on customer engagement via social media like Twitter and Facebook.

Of course, all this ‘front end’ stuff won’t get M&S very far unless it gets the ‘back end’ right, so a huge investment is taking place in building a world-class IT infrastructure, based on the IBM WebSphere platform, to replace the old Amazon systems.

M&S describes this as “moving from renting to owning the car” and it has done all it can to avoid a car crash: a team was sent to the US retailer Target to hear how it got on with its own migration away from the Amazon systems last year (make sure you build the capacity to cope with unexpected surges in customer demand was one key lesson). And the new specialist and highly automated ecommerce warehouse in Castle Donnington is being carefully tested before going live in spring of next year.

Hearing retailers talk about huge changes in their IT and warehouse systems would normally make anybody nervous, but M&S seems relaxed about the risks and is already planning an analysts trip to see the shiny new warehouse in April. We shall see how M&S lands these big infrastructure moves, but ASOS managed its own warehouse move perfectly, so it can be done.

In the meantime, the world is not standing still, least of all the digital world, but if M&S gets its execution right, it could move from being an online laggard to a leader in a couple of years’ time.