Performance of Retail Businesses in Christmas Season Dissertation

Introduction

The Christmas season marks the start of a shopping frenzy for most consumers in the market as they seek to purchase gifts for the family, peers and colleagues for the occasions of Christmas and New Year. The UK retail market as a result sees an increased volume of sales and turnover in this period. The retail industry specifically deploys specialist marketing strategies aimed at increasing the volume of sales through discounts and special offers in the UK.

The dissertation undertakes a study that compares the sales/ marketing strategies and the performance of the retail businesses during the Christmas season in UK. The two companies that have been targeted for the purpose of the study include Marks & Spencers and House of Fraser. The study examines the sales and growth performance of these two companies while also determining the marketing strategies that companies have used to facilitate their increasing sales.

The Aim of the Dissertation

The aim of the dissertation is to provide insight into how retail businesses and similar organizations fare in terms of their performance and growth during the Christmas season in the UK. Christmas season marks the highlight of the shopping calendar for most in the UK with retailers offering new range of collections, products and services as well as high levels of discounting to their customers during the Christmas season to attract sales. This increases the revenue and the profits for the retail businesses through volume. The research aims to compare the performance of Marks & Spencer and House of Fraser to determine the successful strategies that can be used by other retailers in the UK to increase their sales and profits during the Christmas season.

Marks & Spencer

Marks & Spencer is a well known retailer in the UK that provides its customers with a wide range of products n the categories f home, lifestyle food and merchandise products. “Marks and Spencer Group (M&S) is a leading retailer of clothing, foods and home ware in the UK. The company operates in about 41 countries worldwide with UK as its primary market. It is headquartered in London, UK and employs about 75,000 people.” (‘Company Portfolio: Marks & Spencer Group Plc’, 2008)

The company has a business structure based on the geographic presence of the company in the worlds. However the UK based operations are categorized as per the business functions that take the form of food and general merchandise. The food division at Marks & Spencers provides grocery based as well as cooked and packaged food / edible items to the consumers. The general merchandize division consists of the clothing section that provides apparel and fashion products for men women and children, and the furniture and home wares section that provides the customers with lifestyle and home improvement/décor products.

The strengths of Marks & Spencers include its string market position, kits string brand equity and the strengthening growth and expansion in the international markets. The weaknesses of the company pertain to the declining overall sales in the UK as compared to the other international markets and the weak cash position of the company. The threats that are faced by the company include intense competition in the retail industry, the increased minimum wages in the UK and the gradually decreasing consumer confidence in the UK. The opportunities that are available to the company for future business pertain to employment of competitive pricing; growth in the online retail spending that can lead to increased revenue from online operations, and the expansion of network and merchandising operations.

House of Fraser

The House of Fraser is amongst the top retailers in UK that provides its customers with lifestyle products and services. The company primarily operates in a departmental store format like that of the Marks & Spencer. “House of Fraser, a privately owned subsidiary of Baugur Group, owns and operates department stores. The company offers products that include women’s wear, menswear, children’s wear, health and beauty products, fashion accessories and home improvement products. It also provides various own label brands such as Linea, Howick and Therapy. The company primarily operates in the UK and Ireland. It is headquartered in London, the UK and employs about 6,500 people.” (‘Company Profile: House of Fraser Limited’, 2009)The brands that come under the House of Fraser label include Sticky Fingers, Elle Macpherson, as well as Jimmy Choo, FCUK and Diesel.

The main competitors of the company include Debenhams Plc, John Lewis partnership Plc and Marks & Spencer Plc. The House of Fraser has operations primarily in the United Kingdome only with its stores in Glasgow, Guildford, Surrey and Ireland.

Problem Statement

The study is not targeting any particular problem in the retail industry. Instead the research is aimed at an explorative analysis on the performance of the retail businesses in the UK specifically during the Christmas season. The main problem statement for the research and the following dissertation as a result is as follows:

An explorative study and an analysis of UK retail businesses during Christmas season: a comparative analysis of Marks & Spencer and House of Fraser.

Purpose

The purpose of the following dissertation is to highlight the performance of the retail businesses in the United Kingdom particularly during the Christmas season. Retailers employ various marketing, promotional and branding strategies for their Christmas campaigns and this study is meant to determine the effect of their strategies on the performance of the retail businesses with revenues from the sale of their products and services. More specifically the purpose of the undertaken study is to analyse and compare the trends, similarities and the differences in the performance of two major retail companies in the UK, Marks & Spencers and House of Fraser. The dissertation also provides recommendations on the best strategies employed by the retailers for increased business during the Christmas season. This can provide the retail business in UK with an insight on what strategies can be employed in the future to increase their sales and therefore their sales revenues.

Significance of the Study

Christmas season shopping is a tradition for most families in the UK where customers crowd the streets to make their seasonal purchases as well as Christmas and New Year gifts. In the United Kingdom the Christmas also marks a season for sales and discounted prices on new diverse and designer products. This means it becomes more affordable pr people to shop during the Christmas season. The study undertaken is significant to the retail industry as it highlights how the retailers perform during the Christmas season and what other independent variables affect the sales and revenue of the selected retailers. The most successful strategies of promotions and sales undertaken by the retailers will also be highlighted. The retailers can use this information to adjust their following years Christmas season campaigns to increase their profit and revenues from increased sales.

Nature of the Study

The research undertaken for the purpose of determining the performance of the retail businesses in the United Kingdom during Christmas season pertains to a historic research. The research design mainly involves a literature review that would analyse the secondary resources and data available on the performance of the retail businesses in UK. The data is primarily taken from the secondary resources like the peer reviewed journals available on the journals databases, official industry reports, newspapers and periodicals and from the annual business performance reports that are published on the websites of the two companies. The research mythology that has been selected for the study is appropriate and fitting for the purpose of the study as it provides an in-depth view on what factors influence the Christmas sales of the retail business in the UK and how the performance of the retail businesses in UK is different form that of season other than Christmas.

Conceptual and Theoretical Framework

The concepts and the theoretical concept behind the research are grounded in the principles of microeconomics and the principles of marketing. The functions of demand and supply are at play here, with the marketing principles affecting the demand of the consumers. The Supply function is dependent on the capacity of the supplier to manufacture the goods or make them available to the final customers or consumers.

The cost of operations, availability of materials and human resource are amongst the elements that affect the dependent supply function. The Demand function is basically dependent on the willingness and the ability of the consumers to purchase a product. The other elements that affect the demand for a consumer pertain to the brand name, the image of the company, the image of the store, previous experiences, the price, product and service offering and competitor offering as well as environmental elements. The marketing principles pertaining to promotions, brand & image building, seasonal discounts and sales offers made by the retail businesses strongly impact the demand of the consumers during the Christmas season. As a result retail businesses tend to make most of their revenues during the winter/ Christmas period.

The Objectives and Research Questions

Objectives

The following are the objectives of the dissertation and the undertaken study:

1. To compare the sales trends between Marks & Spencer and House of Fraser to determine similarities and differences
2. To identify the sales trend at Marks & Spencer and House of Fraser during Christmas
3. To identify the strategies used by the two retailers to increase business during Christmas period.
4. To determine presence and the effect of external variables pertaining to principles of marketing, brand building, sales and store management through association on the retail business performance
5. Determine the successful marketing, sales and image building strategies can be used by retailers to increase business during Christmas.

Research Questions

The following highlight the research questions for the study.

1. What sales trends exist in Marks & Spencer and House of Fraser during Christmas?
2. How are the sales trends at Marks & Spencer and House of Fraser similar and different?
3. What strategies are used by the two retailers to increase business during Christmas period?
4. What external variables including principles of marketing, brand building, sales and store management through impact the performance of the retail business?
5. What are the successful marketing and sales strategies that can increase business for retailers during the Christmas period?

Limitations of the Study

While actions have been taken to keep the research and the following dissertation as comprehensive and complete as possible, there are some limitations that can be associated with the study. These limitations pertain to the fact that this dissertation primarily focuses on two retail businesses in the United Kingdom. It was not possible for the researcher to undertake an analysis of all retail establishments in the UK, as a result Marks & Spencers and House of Fraser were selected as the main subjects of the study as they represent a large portion of the retail market in UK. The other limitation of the study is that it cannot be generalized to the larger international retail market as the focus is geographic specific specially the United Kingdom. Other limitations relate to the fact that the data used for the research is secondary data not particularly devised for the purpose of the dissertation. This can have an effect on the validity of the results of the research.

Literature Review

Demand Function

The demand function provides a relationship between the consumption of the customer and the willingness as well as the ability that they have to consume more or make purchases. The demand function is a principle of microeconomics which is dependent on other functional elements. The demand function main sources of the demand function are independent in nature and tend to influence the dependent demand function. It takes into account consumption, investment, government spending, and net exports that are calculated by deducting the imports from the exports. “The demand for any good is the amount consumers want to buy and are able to buy in a particular period of time.

The basic model of demand says that the amount demanded of any good depends on the good’s own price, consumer income, the prices of substitutes and complements, consumer preferences, and perhaps other factors.” (‘Demand Functions and Demand Curves’)The other factors that also tend to influence the demand for any product or service pertain to the income, the tastes of the consumers, their preferences as well as the price of substitutes. In the retail sector demand is influenced by the above mentioned drivers as well as the product and services offered in the retail stores, the ambiance of the store and the store layout, the brand name and image, as well as the past experiences of the consumers with the retailer. The price of the product and services and their availability also influence demand for the consumers in the retail sector.

Supply Function

The supply function is similar to the demand function as well as it is also one of the principles of microeconomics. However while the demand is generated by from the consumers, the supply of goods and services is mostly handled by the suppliers and the resources that are available to them.

The supply function is also a dependent function that is dependent on the prices of the resources, technology, state of the market, the number of suppliers in the market, taxes imposed on the suppliers, the subsidies provided to them as well as the prices of the complementary goods or associated products and services. “The basic model of supply assumes that the amount supplied depends on the good’s own price, the prices of inputs used in its production, the technology of production, certain kinds of taxes, and perhaps other factors.” (‘Supply Function & Supply Curves’) Retailers are the suppliers in the market and they tend to increase sales by increasing demand and increasing the supply possible in the market as well to attain a favourable equilibrium for them that generated higher level of sales and profits.

The retailers increase supply of their products and services by investing in updating and innovating their technological resource, applying for subsidies and acquiring resources like raw materials at lower costs. The retail businesses seek to maintain optimum level of supply in the market hat matches the demand in order to be cost effective as well as efficient in the market. Where the supply is greater than the demand, the suppliers seek to market themselves to increase the demand to meet the supply of their products and services in the market.

Marketing Principles and Four Ps

Marketing is essentially determining the needs and the requirements of the consumers in the market and providing them with the products and services that fulfil these needs while making the business profitable as well. The marketing of products and services usually revolves around the four Ps of marketing that have been elaborated upon by Phillip Kotler. These Ps pertain to product, price promotion and placement/ positioning.

The product is essentially the product or service that is being provided by the business to the consumers in the market. The product can be tangible as well as intangible. The price is the value that is assigned to the product by the business. The price should be equal to the value that the consumers perceive for the product and one that is profitable for the business as well in order to be effective in order to sell the product to satisfy the demand of the customers while also generating revenue for the business. The placement and positioning of the product pertains to the disbursement of the product in the market and how it is made available to the consumers. The high level of availability generally results in more sales and increased profits generated via volume for the company. The promotions on the other hand are the marketing activities that are undertaken by the business to attract the customers to the business and purchase the marketing products and services.

Marketing Promotions and Demand Function

The highpoint of the year for the majority of the fashion boutiques, departmental stores and retailers in the United Kingdom is the Christmas period when they see sales levels that are double or triple their average sales levels. The main reason for the high level of sales during the Christmas period is due to the increased demand for the products and services and the matching of the demand by the supply at the end of the retailers. Christmas is a time when most consumers in market tend to purchase items and gifts for their colleagues, peers, friends and family members. The retailers during the Christmas season also tend to increase the demand for their products and services by launching marketing campaigns and increasing the demand for their products and services.

The retailers strive to influence the dependent demand function by increasing the consumption in the market. The main tool that is used by the retail businesses to influence the demand include the four Ps of marketing that have been highlighted earlier. The retail businesses seek to adjust the price of the products, modify the products themselves as well as enhance or diversity the positioning and the placement of the products and services in the market in order to increase the demand for the customer. The promotion plays a big part in increasing the demand for the products and the companies make use of various advertising and promotional strategies to attract the customers to their business.

“Advertising can create demand for not only your product, but other products in your product category. This isn’t a completely bad thing, but what you really should try and generate interest for if your product within that category. This is also known as secondary demand. Advertising that tries to influence demand for a specify product should present reasoned arguments and emotional appeals to generate more demand for the product over competing products. What makes your product better? Why should people buy it? When creating your marketing message think about how to incorporate answers to these type of questions.” (‘Functions of Advertising: Informs, Influences, Reminds, Alters Perceptions, Assisting In Company Efforts’)

Marks & Spencer

The trend for the sales performance for Marks & Spencers during the Christmas period is t have higher than average sales levels that provide a considerable increase in the profit levels of the company. The retailer also however tends to increase the demand of its products and services further by using promotional activities and advertisements that seek to encourage consumers to purchase more during Christmas.

Marks & Spencer gets the highest recall rates for its ads in the UK. In the Christmas season the company often uses 30 second ads to market its food segment specially targeting the consumers for Christmas purchases. The company sells ready made feast items for Christmas to the consumers during the season. While other retailers marketed their services by hiring celebrities to endorse their products and provide recipes and tips to the consumers the Marks & Spencer focused on providing their customers with customized and ready made feast items. “Sainsbury’s having Jamie Oliver telling me about new things to cook and how to do it, but it’s something completely different when someone has gone to all the trouble of doing it for me. Not since the 60s, I reckon, have so many households sat down at the same time to devour the same thing. While Bisto, at number nine on the list, is telling us all to sit down and eat together, M&S is simply showing us why we should. (Beverley, 2005)

In previous Christmas seasons the company has also made use of celebrity endorsement and marketing power to market their products. In 2005 when Boots was providing special offers with 3 for 2 deals, ad C-op was promoting sale of spirits at highly discounted prices,” Marks & Spencer Group PLC, however, took a different tack with 40 seconds of slick, celeb-filled festive brand-building.” (Colin, 2005)

In 2007 the Marks & Spencer Company made use of branding with a theme of festivities to promote its Marks & Spencer brand and to encourage consumer spending. The company joked forced with the popular band Take That to promote their music in their shops as well as increase foot traffic and therefore sales in their stores. The company chose to sell the signed and autographed albums of the band at its selective stores in UK during the Christmas season (Clark, 2007).

Aside from this the company also used co-branding and associations along with celerity based advertisements and promotions to advertise its men’s clothing range. These advertisements starred the likes of Howard MacDonald, Gary Barlow and Mark Owen wearing its signature suits. “The deal, negotiated with Universal Music, followed the launch of the ad, which saw the band become the latest faces of M&S’ Autograph menswear range.”(Clark, 2007)

The Marks & Spencer retailer made use of celebrity based advertising again in 2002 when the company hosted a group of celebrities including Joan Collins David Beckham to star in its Magic and Sparkle themed Christmas campaign that featured on the Christmas gifts and histing ideas available in its stores and outlets. “The 40-second commercial opens on a miniaturised Denise Van Outen dressed as a Christmas fairy, perched on a present and swinging her wand. She asks: “What makes Christmas magic? Hands up!” Several humorous vignettes follow, also featuring celebrities including Graham Norton, Cat Deeley and Sean Bean, with each scene showcasing the store’s clothing, gift and food products.

Jude Bridge, M&S’s head of external marketing, said of “magic & sparkle” — which was first introduced last year: “It has real customer resonance, achieving a very high level of awareness, and is now fully established as an M&S property.”” (Watts, 2002) In other years the company has also made use of celebrities to make pantomime ads like ‘Once Upon a Christmas’ (Gardner, 2005) and hire celebrities the like of Emma Bunton and Will Young in its Christmas Campaigns, s the

Aside from launching advertising and marketing campaigns aimed to target the audience and the consumers with celebrity appeal, the Marks & Spencer Company has also employed strategic management of its marketing campaigns and use of specific timing to attract customers for increasing sales in store. The company often launches its TV based Christmas advertisements long before the start of the Christmas period in order to instil the name of Marks & Spencer as a destination store for Christmas. “Early advertising can pay off if it means the retailer is seen as a Christmas destination store, according to Nick Gladding, senior analyst at Verdict Research.”(Barnes, 2004)

Marks & Spencer along with other retailers in the market has made use of specialized pricing, and discounted deals during the Christmas season to boost its sales. Consumers also highly anticipate the Christmas season sales when products in the retail stores are significantly market down due to increased competition and limited time for making most of the sales. “Consumers are leaving their shopping as late as possible to get a bargain. Mintel has already dubbed 20 December 2004 as ‘Black Monday’, the date by which most discounting will have to be started. For retailers, this means the battle for Christmas shoppers’ wallets is set to go right to the wire.” (Barnes, 2004)

The common pricing and sales strategy that has been observed at the Marks & Spencer has been to provide their customers with low levelled discounts and limited deals n the early period before Christmas while the focus is still on premium based pricing. “The retailer attributed the 3.8 percent increase in sales to Pre-Christmas shopping. It turned out that the company’s decision to not to offer discounts was effective. Company CEO Stuart Rose asserted that the figures have been very impressive but expects the market to be challenging” (‘Home rise at M&S’, 2006). However as Christmas draws nearer, the retailer goes into heavy discounting that can range up to 20% to 40% off on Christmas themed products while others can carry much higher discounts. The last minute sales in Christmas that are offered by the company are the most massive of them all though.

“”M&S has been introducing sales at the last minute. Chief executive Stuart Rose personally ordered a second one-day sale last week after studying trading figures. An M&S spokeswoman claims the decision was made because its first sale day, in November, was so successful. ‘Customers have come to expect this kind of activity in the run-up to Christmas,’ she argues” (Jardine, 2004). Such gradual sales and levelled pricing strategies have helped the retailer in 2008 “Marks & Spencer went into its post Christmas sale with 15 percent less stock than last year, according to chairman Sir Stuart Rose.” (‘Stock control key to merry Christmas’, 2009)

The changes in technology and the increased use of internet for shopping have enabled customers to be more confident when making their purchases online. Particularly in the Christmas period it provides them relief form the crowded streets and shops as they can make their essential purchases online at their convenience. Most retailers as a result have inline operations to support their retail store based operations. “According to intelligence service Hitwise, high street retailers experienced the biggest online growth compared with 2005. Web hits were up by 107% at Waitrose, 50% at HMV, and 25% at Marks & Spencer” (Knights, 2007).

The report also revealed that the growth figures were highest for Marks & Spencer that faced almost 70 percent increase (Knights, 2007) in its revenues from online operations. (Knights, 2007) However few like John Lewis, Harrods, House of Fraser and Sainsbury’s have a highly developed online shopping portal for their target market. “Hitwise has revealed that retailers such as Marks & Spencer Group PLC (M&S) and John Lewis Partnership PLC were among the top online performers in December 2006. According to the figures from the online tracking service, it showed that M&S visits were up 25% year-on-year in December 2006 and with John” (‘Christmas boost for online visits’, 2007) The retailer has made use of strategic pricing, sales and discount based strategies for its online operations as well. “Debenhams and M&S both offered cash discounts during the pre-Christmas season. MS became the third most visited web site on November 19, with an average visit times of 11 minutes.” (‘Pre-Christmas online sale boost’, 2008)

In the year 2008 however the company has faced low levels of sales in the Christmas season. “The company suffered a decline of 2.2% in like-for-like sales in Great Britain, despite the growth in volume and footfall. Marks & Spencer’s Internet sales had increased by 78%, while international sales had increased by 20% of the total business” (‘Marks & Spencer: Christmas trading update disappoints’, 2008).This can largely be attributed to the recession in America and Europe that has been caused by the meltdown of the financial markets early on in the year The reducing employment levels in UK, the high cost of living and the low level of income and insecurity in the economy have led to reduced consumption amongst the target market for marks and Spencer.

This however is not just true for Marks & Spencer as generally the consumer confidence in Christmas shopping and spending was low resulting in low revenues in the overall retail market. “Despite holding two discount days in the run up to Christmas, home sales plummeted at Marks & Spencer PLC in recent weeks. Home sales fell by 23.3% in the six weeks to January 1, 2005 and by 25.2% in the 13 weeks to January 1, 2005. But it was not the only chain to experience disappointing trading. Allders PLC reported a 2% drop in sales in the six weeks to January 1, 2005 with a poor pre-Christmas performance.” (‘M&S was not alone in poor winter sales performance’, 2005)

House of Fraser

The House of Fraser mainly operates in UK and therefore the scope of the market for the company is relatively limited as compared to that of the Marks & Spencer. The retailer is a subsidiary of Baugur which makes it relatively smaller than Marks & Spencer as well. While the marketing strategy deployed by Marks & Spencer primarily focuses on big budget marketing campaigns and celebrity based advertisements, the House of Fraser takes more personalized and strategically steps to increase its sales during the Christmas season.

In order to customize its product and service offering for the customers during the Christmas season, the House of Fraser has taken steps to provide specialized products such as cut and pruned Christmas trees along with tree decoration to the customers in its stores (Passy, 2008). The company has offered this product through the mail order service as well so those of the customer that are unable to make a visit to its stores can still order the Christmas trees from the retailer. Aside from this in the recent Christmas season the retail also took to adjusting and reshaping its fashion collections and accessories in the store to reflect the more festive feel of the Christmas. “Emma Jones, senior creative at the company Construct states that during Christmas retail stores focus on the design of their carrier bags to attract customers.” (Richardson, 2008)

The House of Fraser has had a confused imaging in the past which has led to a slow growth for the company in the retail sector (Gorman, 2007). However since the company has been taken over by the Baugur Group, the company has been slowly and strategically positioning itself in the retail industry to appeal to the market as an elite retailer. The Baugur Group in 2007 even proposed use of 3m pounds advertisements to establishment the image of the House of Fraser as an high street elite retailer (‘House of Fraser in £3m ad Pitch’, 2007)

The company has re-branded and re-established itself in the retail market by changing its brand symbols and updating its store layout, ambiance and environment to better suit its target image of being an elite high street retailer. Traditionally the company has had a brand logo in the form of a leaping stag since the last 10 years. However following the acquisition of the retailer by the Baugur Group in 2006, the company is re-branding itself. “It has introduced contemporary colours and pared down the logo. The new look is intended to support, rather than compete with, the other brands sold at House of Fraser, according to an agency spokesman.

The department store is currently reviewing its marketing operations, which are expected to be completed by the end of this month. Baugur is believed to want to reinvigorate the brand to follow in the footsteps of Marks & Spencer, which has successfully turned around its ailing fortunes.” (Godsell, 2007)

The decision to change the image of the retailer to was taken sue to the success House of Fraser faced in the past with the store refurbishments that it underwent in the year 2001 that led to doubling of its sales. “House of Fraser has reaped the benefits of its store refurbishments, with like for like home sales more than doubling in the second half of last year to 4.8% compared to 2.1% in the first half. In the new look stores, the home furnishing department has been renovated to complement the clothing section. It has become more design led, emphasising contemporary styles. Group turnover rose to £847.3m for the 52 weeks to 27 January while pre-tax profit, excluding property disposals, rose 4.7% to £17.8m. Profits continued to be affected by the ongoing refurbishment.”(Baum, 2001) The company now aims to make similar changes in order to completely overhaul the brand and the image of the retailer as well as increase the volume of sales for the company.

Aside from updating the image and the store ambiance the retailer has also taken steps to make the operation in the company efficient for higher revenues and profits. The company has significantly invested in technology to target effective planning and control for its stock in order to minimize wastage and excess expenses and generate streamlined revenues for higher profits. “The department store group benefited from the greater visibility of its sales for the first time this year after beginning the implementation of new software in 2003.

The Store Planning application from software supplier Smart VM is the final planning tool that House of Fraser has implemented in an overhaul of its merchandising systems. The retailer has integrated its planning, replenishment, assortment and space planning tools into one system called Merchandise Planner” (Hadfield, 2006). The software has also been able to increase the gross margins for the company by linking the shelf space with planning of the procurement and the supply chain management system to increase efficiency.

The House of Fraser has invested in repeat business with its customers while encouraging loyalty and increasing the brand awareness of the company in the target market. The company launched a branded credit card for the House of Fraser retail establishment in 2007. “The programme, which previously incorporated only a House of Fraser store card, now allows customers to collect redeemable points when they use their branded credit card. The card can also be used in other stores, but more points are awarded for House of Fraser purchases. Recognition Rewards is being backed by a campaign through Stephens Francis Whitson. Using the strap line ‘Recognition.

You deserve it’, the work involves online and offline customer communications and advertising.” (‘House of Fraser rejigs rewards’, 2007) Aside form this during the Christmas season the House of Fraser also offered exclusive discounts to its credit card holders on specialized Christmas themed products in store and through its online shopping portal.

The sales volume and the performance of House of Fraser during the Christmas season in 2008 have also been significantly low. This has been retrospective of the performance of the company in 1998 when the economy was facing a bruised economy due to the fall created by the dotcoms. “Sales volumes at House of Fraser rose by less than 5% in the critical Christmas/New Year period, and by only 2.3% at Sears. HoF’s shares reversed sharply, giving up all recent gains for a 26p loss on the fortnight. Argos’ announcement of the 31 new stores made little impression upon analysts who were focused upon the miserable 1.5% increase in Christmas sales. The shares lost 55p, plunging to a new low of 450p and a loss of 33% since September” (Friars, 1998).

Methodology

The methodology that has been used for the dissertation is the historical research that has a qualitative and a quantitative design. As the nature of the study is historical research, the main sources being used in this research are those of the secondary nature. No primary research has been conducted for the purpose of the dissertation, making it less complex and amore appropriate for the purpose of the dissertation.

The literature review is built on the theoretical concept and provides and an exploration of the various microeconomics and marketing principles operating in the retail industry. The literature review section also highlights the various marketing strategies used by the retailers, particularly the Marks & Spencer and House of Fraser along with the analysis and a comparison of their retail sales strategies. An analysis has been undertaken to compare the performance f the two companies during the Christmas season as opposed to their performance n the non Christmas period to determine how they fare in the UK retail industry in the Christmas period.

The research employed qualitative as well as quantitative research. The qualitative research is undertaken in the literature review section while the quantitative research is employed in the analysis of the performance of the two companies during Christmas season. The following sections provide the validity and reliability, feasibility and the appropriateness of the research along with the data collection and the data analysis methodology.

Research Design

The research design as mentioned earlier incorporates an analysis of the two companies Marks & Spencer and House of Fraser based on historical data. The data however is of two types, qualitative and quantitative making way for a comprehensive look on the performance of the two retailers during Christmas period and what factor influence their sales. The data has been collected form secondary sources that have been peer reviewed and authorized for public disclosure in order to ensure the validity of the information being analysed in the study.

Historical Research

The type of research used for this study is the historical research which essentially employs collection of secondary data that has been generated over a significant period of time. The research undertaken makes use of data particularly relating to the performance of the two companies dating as far back as 2003. in the step based process, the problem has been determined and the research questions have been formulated as mentioned in the previous chapter. The data collected is also analyzed to arrive at the findings of the study and the recommendations for the retailers as to how they can increase their sales levels during Christmas.

Qualitative and Quantitative Research

The research makes use of both qualitative and quantitative data on which qualitative as well as quantitative analysis is performed. The literature review males use of the secondary information that is mostly qualitative in nature. The past performance records of the companies during Christmas seasons as well as the specific strategies that have been used by them to increase and influence their sales are highlighted in the literature review. The theoretical concept is also elaborated in the literature review with detailed overview of the relevant microeconomic and marketing concepts. The quantitative data is utilized in the analysis sections where the financial performance of the company is explored and analysed through quantitative data analysis techniques to determine the trends for the performance of the retailers during the Christmas season.

Validity and Reliability

The validity of the data used and the study undertaken in the research was ensured by making sure the data used for the qualitative and the quantitative analysis was valid and had integrity. The integrity of the data was ensured by gathering data form authorized sources of information, industry reports and peer reviewed journals. The financial information was taken form the official company websites particularly their shareholder information sections. Aside from this an unbiased approach was taken when gathering and analysing the data for this research.

Methodology and Appropriateness

The purpose of the research is to determine how the performance of the retailers in UK differs during Christmas season, how their sales levels change and how the marketing strategies employed by the companies influence their sales levels during the period. The analysis of the historic data available ion the performance of the retailers in UK provided the best option to arrive at a conclusion for the above highlighted purpose of the dissertation as it was relatively simple and provided a comprehensive result that could be backed with supportive data.

Feasibility and Appropriateness

The research mythology and the study that has been sleeted is very feasible to undertake for the researcher as the researcher had access to the relevant and required information through internet based data banks, online as well as public libraries. Aside from this the information on the performance of the UK retailers was available on their website which made a historical research which data collection and analysis easy and possible for the researcher.

Data Collection

The data that has been collected for the historical research in the dissertation has been taken from online data banks and the official websites of the two selected retailers Marks & Spencers and House of Fraser. The academic and industry research data bases like Ebscohost & Business Premier have been used to access peer reviewed articles and studies on the subject matter as well as industry reports and industry journals on the performance of retail businesses in the UK. The trade journals as well as the marketing journals have been used to gather information on the marketing principles and the marketing strategies used by the retailers to influence their sales. The quantitative data that has been used in the study has been collected from the official websites of the two selected companies, Marks & Spencer and House of Fraser.

Data Analysis

The qualitative data has been analysed using a subjective analysis techniques that employed keyword based analysis. The quantitative data however has been analysed using statistical analysis methods of comparison and trend finding. MS Excel as well as other mathematical software has been employed to analyse the quantitative data that was mostly of financial nature. Graphs and pictorial descriptions are provided to highlight the results of the analysis.

Analysis & Findings

The following sections provide an analysis of the research conducted and highlight the findings of the research.

Marks & Spencers Christmas & Sales Performance

The Marks & Spencer stores form a majority of the market share in the retail industry. However despite the exhaustive investment by the company in marketing efforts to attract customers and encourage spending on their part, the retailer has reported massive falls in its holiday season sales. The company has been facing problems in terms of attracting customers in the holiday season for increased revenues for the past few years with the slump in sales that it has faced since 2006. “UK like-for-like sales fell 2.2% in the last three months of 2007, its worst performance for more than two years. Sales of clothes and homeware declined 3.2%, while food sales dropped 1.5%. M&S said trading conditions would remain tough in 2008. The news pushed the retailer’s shares down 18.7% to 409.25p at close of trade. “(‘M&S hit by poor Christmas Sales’, 2008)

The decrease in the sales has been brought about mainly due to the increase in the insecurity amongst customers about their financial status in the future and the global recession that is making consumers more wary when it comes to spending their money. “British Retail Consortium said UK retailers had seen the slowest sales growth in December for three years, with sales up by just 0.3% year-on-year. Sir Stuart told the BBC that the UK High Street had “definitely slowed up” and conditions in the clothing market were tougher than they had been for 10 years.” (‘M&S hit by poor Christmas Sales’, 2008)

As typical with the holiday season in UK, the Christmas and pre Christmas sales that were put up to attract the customers employed discounting of products and services. However this time round the products and services where discounted more than 6 percent more than last year (‘M&S hit by poor Christmas Sales’, 2008) which also led to reduced revenues from sales while the mass volumes expected failed to emerge in the UK retail market. The online shopping portal for the Marks & Spencer Company however reported a considerable increase in its turnover and sales. “Website sales were particularly healthy, up 78%, and, in contrast to its poor results at home, M&S’s international sales rose 15.1%. “(‘M&S hit by poor Christmas Sales’, 2008)

The performance of a large retailer that dominates the market like the Marks & Spencer can affect the performance of the other retailers in the industry as well. This stood true in the Christmas season performance for 2008 as well where the including Marks & Spencer almost all retailers reported significantly low level of sales and revenue form stores as opposed to previous years. “”We are concerned that this soft performance has been delivered despite huge cash investment in the stores (70 percent were refurbished in time for Christmas), a considerable advertising campaign and strong trading momentum over the last two years,” Wade said.” (Barr, 2008)

House of Fraser Christmas & Sales Performance

The departmental store by the name of House of Fraser also posted that sales of the retailer decreased in the holiday season period of Christmas and New Years of 2009. House of Fraser reported “that like-for-like sales fell 1.5% during the Christmas period amid difficult retail conditions in the UK.” (‘UK: House of Fraser reports 1.5% sales dip over Christmas’, 2009) However despite the slump in sales caused by the unappealing and detrimental market conditions as well as in the presence of the recession the company reported that their total sales [performance for the 5 weeks leading to the first weak of January was very positive with an increase of 4.5 percent over 2007’s performance. Similarly the gross profit for the company also increased which has been attributed to the aggressive marketing strategy employed.

Additionally the stock turnover and the management of the stock at the company using up to date technology and innovations has led the company to experience efficiency in reduced inventories by 10 percent. “The 2008 calendar year has seen store openings, a refurbishment programme and a major Head Office move at House of Fraser. The Company said that the outlook for 2009 was challenging and that it anticipated changes to its brand portfolio, with underperforming brands to leave the business and new brands to be introduced during the year.” (‘UK: House of Fraser reports 1.5% sales dip over Christmas’, 2009)

Research Findings

The literature review combined with the Christmas and Sales analysis of Marks & Spencer and House of Fraser have provided that while the size of the company can lead to improved business, high turnover and sae, high level of profits as well as increased market share, however the more efficient yet smaller company can bear through recession like market conductions with a healthy performance. T

The oncoming recession marked the start of the year 2008 and combined with the crashing of the global financial and banking markets, the confidence level in spending for the consumers greatly decreased all over. This resulted in depressed performance in all sectors of the business, as well as the entire retail industry. Marks & Spencer invested exhaustive funds to attract the customers to increase their spending during the Christmas holiday season through elaborate marketing & advertisement campaigns as well as gradual sales and discounting on items however the repressed confidence led to low level of spending on part of the consumer resulting in low sales levels and lower profit levels for the company.

The House of Fraser on the other hand depicted a healthy performance ion the face of the recession specifically as the previous years’ performance of the company had been quite deplorable. This can be mainly attributed to the new management at the company with the Baugur Group and the efficient manner in which the retailer conducted its operations. The house of Fraser invested in planning and retail management systems to increase efficiency while reduce the costs of wastage and loss through bottlenecks in its operations. This led to an increased efficiency in whatever business that it did generate during the Holiday season. The company launched strategic management and planning initiatives that focused on increasing customer loyalty last year that reaped results in the year 2008 showing healthier performance and sales levels for the company.

The research has indicated that re-branding the retail business can greatly lead to increased business and better performance, especially when the re-branding of the business is conducted in an appropriate manner. House of Fraser that until recently had been facing a confused positioning in the UK retail market between a high street retailer and a convenience based retailer, showed better sales performance in the 2008 Christmas period as compared to the previous few years performance. The company shed its previous conflicting image along with its stag based logo and has started a fresh with a new branding theme and marketing strategy under the Baugur Group.

The research has also indicated that celebrity endorsement and the appeal of the celebrity greatly attracts the customers. Marks & Spencer has been using celebrity based Christmas and holiday season advertisements to promote its specialized holiday line of products and services and increase sales during the Christmas period for a long time now. The celebrity endorsement not only increases awareness of the products and services available but also provides brand imaging for the retailer by association which is what Marks & Spencer goes for. The strategy has aided the company in acquiring a large share of the retail market in the past years and also depicting high level of sales turnover in the Christmas period.

Both retailer including Marks & Spencers and House of Fraser invested in high profile media based marketing strategies that focused on mass marketing to the consumers though TV based advertisements. The 30-40 second commercials remain a favourite of the retailers for advertising their collections, products and services for the holiday season. Moreover the consumers are also more attracted with the motion based television ads that tend to provide incentive to the customers to visit the retail stores with the chance of attaining additional benefits in the form of Christmas gifts and offers by the retailers during the holiday season.

Customers are usually aware of the main product categories that are held by the retailers. However during the holiday period like Christmas, retailers tend to fill special orders and customize their products and service offerings according to the occasion. These changed product and services need to be informed to the customers. House of Fraser employed a mail order service; online advertising as well as catalogue based advertising to provide the customers with a profile of their limited time based products and services for Christmas which included Christmas decorations, Christmas gifts, festive food as well as Christmas trees.

The strategy was successful in attracting sales for the retailer through the online shopping portal, the catalogue as well as through in-store business at the various stores of the retailer. Marks & Spencer also highly customized the products and services especially in the food segment of its business for the Christmas occasion. This led to increase in the sales of the food business during the Christmas season while all other business segments saw falling sales levels in 2008. All retailers during the Christmas season adopted in-store refurbishing for the Christmas period in some form or the other. Aside from this they also invested in attracting the customers though customized festive shopper bags and carryon bags that highlighted the impending Christmas occasion and the Holiday season.

The House of Fraser fared better than Marks and Spencer in terms of profitability and performance in the restricted business and high street environment conditions in the last Christmas and holiday season. The main reason for this was due to better planning and strategic use of the resources that the company had employed. House of Fraser invested in a stock planning and retail management system that highlighted efficiency and reduced wastage and related costs to provide the company with more margins to grow and increase its performance this season. The investment in business process improvement technology that reduces operating costs while can lead to better performance levels in the face of recessions as is evident in the case of House of Fraser.

The diversifying operations can also greatly reduce the threat of environmental conditions and the changing forces of the environment to influence the operations of the business and its performance in a negative manner. Marks & Spencer reported that while almost all its segments except the food division showed greatly reduced growth with even declined level of sales as compared to 2007, the online internet based retail shop for the company generated most of the profits for the company in the Christmas season with a 70 to 80 percent reported growth in the Christmas period alone. The main reason for this was due to the increase in the number of visitors and shoppers online as opposed to in-store shoppers.

Conclusions and Recommendations

The following depicts the conclusion for the research and the recommendations that can be employed by companies operating in the retail sector to better improve their sales levels during Christmas season.

Conclusion

The dissertation provides that the demand is the basis for the increase in sales for any product and service. The demand for any product or service is derived from different elements and functions that are external as well as internal to a company. The external elements of demand pertain to customer preferences, consumption confidence, loyalty, market conditions and the customer perceptions. The internal elements that influence demand and that can be controlled by the retail businesses include price, quality and the image/ perception of the retailer in the minds of the consumers.

The retailers as a result tend to influence the controllable elements of the demand function to generate higher level of sales for the company through repeat purchase and increased volume of sales. The desertion has revealed that it is highly possible to influence demand of the customers by changing the marketing strategy, employing re-branding techniques, increasing the investment in technological innovations as well as employing store management strategies that focus on enhancing the ambiance of the store according to the demands of the customers.

The analysis of the data gathered and the literature review revealed that in the UK retail market there can be competition in a large company like Marks & Spencer and a smaller retailer like the House of Fraser. While both of the companies are retailers with an image and persona fo being an elite high street retailers catering to similar target markets with similar products and services. Their scope and operations are quite different.

House of Fraser is a smaller establishment primarily focused in UK and Ireland while Marks& Spencer is a global brand that has operations in multiple countries and therefore access to larger resources for its operations. Despite the size of the companies, the Christmas season of 2008 depicted that House of Fraser was able to attain a better level of sales turnover and growth in the face of the recession as compared to Marks & Spencer which faced huge losses and a drastic fall in its sales levels. The reason as to why House of Fraser faired better than Marks & Spencer was mainly due to its size, the flexibility with which it was able to change its branding and theme in the market to a more focused one and the implementation of innovative technology to support the business processes while investing in store management and strategic marketing plans focused on increasing customer loyalty.

Recommendations

The study undertaken has revealed that it is very much possible for the retailers in the industry to influence the demand of their target markets through various brand building, image building, and sales based, discounting and marketing promotions as depicted in the Christmas season. The following depict the various recommendation that have been assembled by the researcher that can aid retail businesses in increasing their sales while also increasing profitability for the business through volume sales and higher margins on products and services sold.

• Changing the image of the brand or re-branding can effectively increase the demand for the products and services of the retailer. Re-branding makes use of re-positioning the retailer in the market with a new strategy. This re-enforces the image the company wants to maintain and present in the market while providing a new product and service offering to the customers. The re-branding of the House of Fraser under the Baugur Group has revealed that a conflicting retailer can also become a successful business with a clear vision and established image in the market.
• Re-branding often involves changing the layout of the store to complement the new brand and its image. Store management, and refurbishing of the stores according to the new image can lead to increased foot traffic and therefore increased sales for the retail business. The research highlighted that during the Christmas season both Marks & Spencer and House of Fraser conducted refurbishment of their stores to reflect the festive season and emphasize their Christmas season product offering and collections. These strategies were aimed at increasing consumer spending and the foot fall in their retail stores.
• The research provided that advertising through mass communication media is still the highlight of most marketing campaigns during the Christmas season. Marks and Spencer as well as House of Fraser both launched marketing campaigns that included television based commercials and ads for the retail stores and their Christmas themed offers & deals that lasted 30-40 seconds. The recall rates for the signature ads of marks & Spencer were quite high amongst the target market. Additionally Marks & Spencer also focused on the timing of the ads with Christmas ads being launched well before Christmas to claim the position for the retailer as the Christmas shopping destination for the season.
• Marks & Spencer, House of Fraser along with other retailers in the UK retail market made use of price based marketing strategies as well as discounting deals to attract customers for the Christmas season. The strategies that were most successful for the retailers pertained to timing the pricing and discounts in the Christmas seasons. The retailers provided limited and small discounts on the period leading to Christmas on the products and services however after the 20^th of December most of them offered a day or two on which the prices were slashed drastically and heavy discounts were presented to the customers to encourage more sales in volumes.
• The retailers can also make use of celebrity endorsement for their brands or the branding of the retail store itself. Celebrity endorsement is based on association with the celebrities which is highly effective in the United Kingdom. Marks & Spencer has king been using the celebrity endorsement and marketing technique to target the audience by launching commercials and print ads that focus on the celebrities introducing the Christmas holiday based products and services at the retail stores.
• During Christmas the streets are logged and crowed with shoppers that can be an inconvenience for some shoppers. As a result the customers often want options with which they can shop form the convenience of their home at their own time without spending fuel or valuable time in traffic or on the streets. House of Fraser made use of catalogue based marketing and sales strategy to target such customers. The company also offered unique products like Christmas decorations and Christmas trees through the catalogue based marketing service to its customers as well.
• Retailers can also appeal to the customers by employing personalization strategies in their product and service offering. Packaging part of the product as per the marketing principles and the four Ps. Of marketing. During Christmas Marks & Spencer as well as House of Fraser customized their shopping bags and carryon as well as the gift wrapping service at their retailer stores by making them reflect the festivity of the Christmas occasion using the colours of White, Red and Green. The customization of the bags like this can also aid in marketing to other shoppers about the retail brand and its product/ service offering through recall. Additionally the retailers can also customize the products and collections housed in their departmental stores before the Christmas season to reflect the festivity of the occasion and appeal to the customers by creating a demand for Christmas oriented products. Marks & Spencer used this strategy by launching a range of festive feasts and dishes in its food division that saw the highest growth in sales and the best performance amongst the business categories for the company.
• The research has highlighted that in the face of the recession that has been occurring in 2008, while in-store sales shrunk for most companies, online sales flourished for most especially for Marks & Spencer who faced almost 80 percent growth in its online sales. The low costs of operating and maintaining the online shopping portal as opposed to the store increase the profit margins available from the sales of products and services online. Moreover the retailer is able to target the market that is unable to come to its satires to make their purchases. The retailers should therefore seek to diversify into other mediums of making sales and contacting the customer as well, particularly the internet based shopping portal that is increasingly becoming popular amongst the target market for making Christmas purchases.
• Aside from this the retailers should also make an effort to stream line their operations and ensure minimum costs associated with wastage with investment in information & systems technology in order to generate high profit levels during the Christmas season. This is mostly because during the Christmas season the profits usually come from sales volume with heavy discounting often being conducted to be competitive in the limited time available to attract the customers. The retailers also launch marketing campaigns that eat add to the costs associated with conducting business. This reduces the profit margins and with high overhead costs and those associated with wastage the profit margins for the retailers can often shrink further during the Christmas season.

The retailers can use the above mentioned strategies for increasing their sales. The Christmas season offers the retailers an option of increasing their business in volume multiple for as compared to the rest of the months in the UK as the consumers are more willing to spend and consume then average. Moreover the festive season also brings about the perks of sharing gifts with each other that has long been targeted by the retailers. However in order to effectively manage the sales of the company in tough market conditions and uncertain consumer spending period the above mentioned recommendations can be use for retail businesses in the UK.

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