By Sarah Montano, Professor of Retail Marketing and Dr Inci Toral, Associate Professor
Birmingham Business School, University of Birmingham
A Trusted Brand Faces an Unprecedented Challenge
M&S is a much-loved British retailer and is as comforting as a warming cup of tea. Many customers will have grown up knowing that M&S is there for them, whether it was a school summer uniform purchase or your Nan buying your favourite foods as a lovely treat. Founded in 1884 as a Penny Bazaar, M&S has grown to be a stalwart of the British high street. In fact, in retail terms, where there is an M&S, there will be shoppers and business will flourish. Yet in recent weeks customers’ love for the M&S brand has been severely challenged.
Over the Easter period when we were all enjoying a hot cross bun, M&S suffered from a cyber incident and the first warnings of this were when contactless payments were not accepted. Subsequently M&S’s online operations were shut down and there is currently no sign of online orders beginning restored.
Furthermore, over the last few days we have seen empty shelves appearing as some of their ordering systems have been taken offline. On 13th May M&S also confirmed that some customer data has been stolen meaning that customers will be concerned for their information security. M&S is not the only retailer to suffer from these cyber-attacks. Co-op and Harrods were also targeted by cyberattacks with hackers using social engineering techniques to “trick” IT staff to get access to the systems.
The High Cost of Cyber Insecurity
Not only do these attacks have a significant impact on customer and brand loyalty but M&S and the other affected retailers are suffering financially. With lost online sales of about £8.3 million every day and half a billion whipped off the company’s value, M&S will be keen to restore order. Unfortunately for M&S, the longer these disruptions persist, the longer the recovery and the harder it will be to regain customer trust.
“The problem for M&S is that today’s consumers expect a shopping experience that is seamless, easy, and above all, safe.”
As online sales form, a major part of their business, customers are likely to start turning to other retailers to fulfil their needs. Many customer purchases will be immediate such as the need for new school uniform or a dress for a wedding and therefore the challenge for M&S will be to win these customers back once the issue is resolved.
The problem for M&S is that today’s consumers expect a shopping experience that is seamless, easy, and above all, safe. An efficient omnichannel strategy that enables customers to shop online or in-store and to switch easily between the two (e.g. browse online, buy instore) is the key to retail success.
To do this, M&S and all retailers need customers to share their data. At the very least, we are expected to share our financial transaction information to shop. This is and has always been a fair deal. With omnichannel retailers offering ‘wherever and whenever’ shopping experiences, customers are happy sharing their information. However, when this convenience is disrupted, and with customers now unable to shop both online and in-store, they may not only switch brands but also begin to question whether their data are secure and their purchases reliable.
Customers can therefore leave M&S and find fulfilment in another brand. Customers are habitual and like consistency and if they find a new brand that they like they may never return. Of course, food purchases are immediate, so an increase in out-of-stock items will force customers to shop elsewhere.
For M&S, one of their strongest competitors is John Lewis. John Lewis with their ‘Never Knowingly Undersold’ promise, is a very similar much loved British brand that is as comforting and familiar as M&S – but with a working website. In today’s hyper competitive environment, brand trust is essential and with recent attacks on the Co-op and Harrods, customers will also be concerned about their data. In fairness to M&S, it’s clear that all retailers must take serious steps to protect customer data and maintain trust.
What Comes Next for M&S?
Another key issue for M&S once operations resume will be how to shift excess stock — with customers not buying online, products will remain stuck in warehouses. Once operations resume, the timing may not sync with customer needs. For example, in a couple of weeks customers will not need school summer uniforms or customers may be getting ready for that much longed for summer holiday and so will be holiday shopping now with other retailers. Keeping stocks at warehouses is costly and once operations resume, with customers no longer needing these items, will leave M&S with several problems.
To compound their financial losses, they may need to discount heavily to shift stock. They may also need to cancel orders from their suppliers causing supply-chain disruption. While dealing with these, they will also need to secure their online systems and rebuild trust with their customers. The effects of these will be different for the other affected retailers. While there are some commonalities, Harrods may recover more quickly due to the return of foreign tourism, and Co-op is likely to experience only short-term losses, as food is perishable and won’t require the same stock-shifting efforts that M&S will face.
As customers, we believe in supporting the brands we trust — and that sometimes means giving them a second chance. We still need to shop, and no retailer can offer absolute security. But we can shop smarter. Many banks now provide virtual cards designed for online use, with added layers of protection. If you’ve been affected, speak to your bank about your options and let’s support M&S in these difficult days.
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- Read more about Dr Inci Toral
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The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the University of Birmingham.