WHAT'S THE STORY WITH M&S'S PRICE CUTS?:WHILE A LOT of people in this country have a soft spot for Marks & Spencer, not even its most ardent admirer would claim it's a cheap place to buy food. It does, however, have one deal which leaves even the cheapest of the discounters in the ha'penny place.
Its “Dine in for two” campaign, which has been running nearly every second weekend for the guts of a year, includes a main course, a side dish, a dessert and a bottle of wine for just €12.50. It has become so popular that websites now buzz with details of the offers as soon as they hit the shelves and shoppers form less than orderly queues as they fight for the last of the free-range chickens, wild Alaskan salmon, roasted Mediterranean vegetables and raspberry panna cotta.
The deals are certainly of their time, not least because they allow people who can no longer afford to comfortably splash out on overpriced restaurants to treat themselves to upmarket-sounding (and often upmarket-tasting) meals on the cheap.
It is hard to see how the deal could be anything other than a loss leader, but that’s not a phrase Jonathan Smith, the head of Marks Spencer Ireland, likes, and, when talking to Pricewatch last week, he said he preferred “footfall drivers”. Smith is hopeful that last week’s announcement that MS has reduced the prices of all its clothes, homeware and furniture in the Republic by an average of 12 per cent will act as a more profitable footfall driver in the coming months.
As part of its “We’ve listened, we’ve lowered” campaign, more than €40 was lopped off the price of a man’s €350 suit, while a dining table, which cost more than €1,700 last Wednesday, fell to just over €1,500 on Thursday morning. Thousands of products have seen their prices fall by similar amounts and Smith expects consumers to be “absolutely delighted” by the news.
He says the price cuts are long term, and a response to the economic downturn and a rising level of consumer concern about price discrepancies between MS outlets in the Republic and in the UK. He admits there have been “loads of customers” asking in recent months why the store is so much more expensive than branches in the UK, and he accepts that substantial numbers of his customers in the Republic have been crossing the Border in search of value – although he might be less concerned about that than other retail managers, as he has responsibility for both jurisdictions.
“We have been watching the market closely and working very hard to get our prices down,” he says. “Now is the time to really give something back.” Surely the time to give something back was 12 months ago, when sterling was approaching parity with the euro and consumers and politicians started questioning the almost universal failure of British retailers with operations in the Republic to pass on the resulting savings to Irish shoppers? Smith rejects any suggestion that the store was dragging its heels and says it has been working hard to drive down prices across its global supply chain so it could pass on the savings to Irish shoppers.
He trots out arguments that are wearily familiar to comments made by rival operators. “Like any other retailer, we do have to take into consideration factors specific only to the Irish market, such as higher rental, operational and employment costs when setting prices,” he says. He also questions the validity of a Government-commissioned report by Forfás that was published before Christmas. It showed that even when higher overheads in the Republic are factored in, prices south of the Border should only be about 7 per cent higher than in the North, and not the 30 per cent more commonly found. Smith says it was incomplete and did not paint a full picture of the cost of doing business here.
When he is talking about the new campaign, he is full of facts and figures, but when it comes to tougher questions about why MS is unprepared to reveal Irish shops’ profit margins, Smith becomes considerably more taciturn.
Like the other major retailers operating in the State, Marks Spencer refuses to disclose the profits made by its operation in the Republic. Smith says it is sufficient for them to be bundled with its international arm. But for the sake of transparency, should consumers not be told how much MS is making from them? “We don’t need to. We are listed as part of the international turnover and we don’t reveal the individual countries’ turnover. I’m sure you would like to know but it is not something I am prepared to reveal.”
Mysterious profit margins aside, Smith is upbeat about business prospects in the Republic and stresses MS’s commitment to the Irish market and to Irish suppliers. While “footfall isn’t down” it is clear “people are starting to feel the pinch”, he says. An illustration of that pinch can be seen in the rapid rise of the German discounters Lidl and Aldi, but Smith claims it has not had “a great deal of impact” on his figures. “We cater for a different market; we are not a full, weekly shopping style of food market. We have a relatively small basket size.”
While Marks Spencer’s focus in the Republic over the next couple of weeks will be on its “We’ve listened, we’ve lowered” campaign, it will also have half an eye on a major campaign its parent in the UK has just embarked on, aimed at highlighting its £200m (€235m) ethical plan.
This campaign, called “Doing the right thing”, outlines eight core principles of its five-year ethical-trading initiative, Plan A, and runs under the banner: “Above all, doing the right thing is doing it today, because our planet can’t wait until tomorrow.” One of the eight advertisements has the strapline: “For some retailers, green went out of fashion as quickly as it came in.” Smaller print says “helping the planet can’t be put on hold when times are tough”.
Other advertisements focus on its relationship with Oxfam, its policy on meat – “We don’t sell poor quality meat. It comes at too high a price” – Fairtrade cotton and fish sourced from sustainable stocks.
Times are undoubtedly tough for MS as it celebrates its 126th birthday. The group has seen its profits fall by nearly 40 per cent and the company’s CEO, Stuart Rose, has warned of another tough year ahead.
Smith, however, is just a little more upbeat. “We recognise that it is tough but the economy will turn around and we absolutely have a very good future in this country.”
