Marks & Spencer has hailed its “best ever Christmas” as customers flocked back for cheaper than expected everyday food items – and reliably affordable clothing – as the company made a concerted push for a bigger share of the weekly grocery shop.
Under boss Stuart Machin the group has been opening larger stores, cutting prices on household basics and even offering bigger packs in order to persuade shoppers to do more than pick up a sandwich for lunch or a ready meal for dinner.
The retailer’s efforts to broaden its appeal appear to be paying off as the number of bigger food baskets worth over £30 going through the tills were up 15% over the quarter, driven by the larger food halls it has recently created through refurbishments or new openings.
M&S edged closer to Waitrose as it took a 3.4% share of the grocery market in the 12 weeks to 2 December according to research firm NielsenIQ (NIQ), up from 3.3% a year before. The upmarket chain is unlikely to ever be Tesco or Sainsbury’s – which hold shares of about 26% and 14% respectively – but Waitrose on just 3.6% is in its sights.
On Thursday, Machin said the company had taken a £60m hit on profit margins to keep prices competitive and win over shoppers.
Sales of the M&S budget Remarksable range – which includes key items such as butter, milk and bread priced at prices on a par with the mainstream chains – were up 18% over the Christmas period while shoppers popping in for some basics also spent 10% more on M&S’s top of the range products.
“Our food business is becoming a different food business and that is not just for Christmas,” said Machin.
“Five years ago we had only a handful of stores that were doing £1m in Christmas week now we’ve got 20-plus doing a lot more than that.”
Clever marketing and judicious pricing on everyday items has seen M&S become an unlikely star on social media channel TikTok where it’s not hard to find influencers – from mums to students – talking about the bargains that can be found.
Better availability and lower costs, helped by the acquisition of M&S’s long-term food distribution partner Gist in 2020, have helped underpin the performance.
A tie-up with online retailer Ocado, where M&S became co-owner and the main grocery partner in September 2020, is another potentially overlooked part of the strategy.
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The joint venture – which reports separate financial results – remains unprofitable, but it does come with other benefits.
M&S now has 90% of its products available on the site, bringing additional scale and therefore driving better deals with suppliers. It also appeals to younger shoppers who might not have ventured into a high street store, a shift that tallies with M&S’s efforts in fashion which have also improved appeal to millennial women.
No doubt information about what sold well for Ocado’s former business partner – Waitrose – has also been useful to M&S, which had to put together numerous versions of the upmarket grocer’s bestsellers to keep Ocado shoppers on side after the switch. Shifts into newer categories such as frozen foods have also been made more viable by the presence of Ocado’s army of family shoppers.
Machin said it was not just gunning for one competitor, but Waitrose will need to up its game to avoid being trounced by its long-term rival.
