Dynamism, snobbery and the future of shopping

It is a tale of two retailers. Yesterday Tesco, the largest supermarket chain in Britain, announced a healthy increase in its profits for the first half of this financial year. Meanwhile, Marks & Spencer revealed that its sales have fallen in the past 10 weeks. The former favourite of Middle England's shoppers also informed its shareholders that though they will be given the opportunity to sell some of their shares back to the company, it will be for less than they would have received if Philip Green's recent takeover bid had been successful. While Tesco consolidates its position, M&S is stumbling again.

It is a tale of two retailers. Yesterday Tesco, the largest supermarket chain in Britain, announced a healthy increase in its profits for the first half of this financial year. Meanwhile, Marks & Spencer revealed that its sales have fallen in the past 10 weeks. The former favourite of Middle England's shoppers also informed its shareholders that though they will be given the opportunity to sell some of their shares back to the company, it will be for less than they would have received if Philip Green's recent takeover bid had been successful. While Tesco consolidates its position, M&S is stumbling again.

The two trends are not unconnected. Since Tesco, along with other supermarkets, began selling clothing, M&S's traditionally dominant position in this area has slipped away. Yesterday Tesco revealed that sales of its three clothing brands have risen. Stuart Rose, the chief executive of M&S, on the other hand, was forced to concede that his company's clothing sales have been disappointing over the summer.

M&S has yet to define its role in an increasingly competitive environment. It is faced with what might be called the "Wal-Martisation" of British retailing. Following the lead of the US retail juggernaut, which owns the Asda chain, British supermarkets are beginning to diversify not just into clothes but into electrical goods, CDs, books and medicines. M&S has sensibly taken the decision to focus on its food and clothing ranges, but success will depend upon providing a level of value and quality that will persuade shoppers to eschew the new breed of one-stop supermarkets. The latest sales figures suggest this is a distant prospect.

In fairness to Mr Rose, the reforms he has implemented have not had sufficient time to take effect. He may yet turn around the company's fortunes. But he should recognise that one of M&S's greatest handicaps in the past decade has been its snobbish and complacent attitude to change. It was this attitude which prevented the company from acting to stop the rot earlier. It also, arguably, led the M&S board to reject Mr Green's bid. M&S is by no means finished, but only by emulating the broad appeal and dynamism of a retailer like Tesco will it rediscover the profitability, and status, that it once enjoyed.