Can the Net save Marks & Sparks?

Britain's biggest clothing retailer hasn't paid much attention to e-commerce so far, and soon it may be too late

Marks & Spencer is effectively ignoring the Internet and missing out on a major opportunity to improve its sinking fortunes, critics charged on Tuesday.

The UK's largest clothing retailer announced poor first-half financial results Tuesday, and CEO Peter Salsbury lightened the blow partly by announcing the company will accept credit cards in stores and on its Web site (www.marks-and-spencer.co.uk ) from next spring. Salsbury said the change would have no immediate effect on the bottom line: "It will only begin to take effect from the year afterwards when the cards are fully operational throughout the chain."

Salsbury did not elaborate on the company's Internet plans, which seemed like a missed opportunity to some industry analysts. "The Internet is a chance to have a more valuable relationship with your customers -- and it's a good way to lift your stock out of the toilet by having a clear Internet strategy," said Evan Neufeld, director of international research for Jupiter Communications.

M&S has promised to have 200 lines of gifts clothing available on its site by Christmas, but online rivals such as Zoom (operated by clothing retailer group Arcadia) and Handbag.com are already far ahead in the online-shopping game. Arcadia, for example, sells a range of goods, from electronics to music, as well as clothing from subsidiaries such as Principles and Dorothy Perkins; Zoom CDs are distributed in all Arcadia outlets.

Other British chains, such as W H Smith, Sainsbury's and Tesco, have all made a point of spotlighting their Internet efforts.

Marks & Spencer also says it will issue a Net-related announcement later this week. As of close of trading Tuesday the company's shares were down 5 at 278p.

Can e-commerce save Marks & Sparks? While making a splashy Internet-related announcement might temporarily lift the group's share price, only a well-thought-out move onto the Web will make any difference in the long term, observers said.

"The Internet can help, if you do it right," said Mikael Arnbjerg, analyst with research group IDC. "But people haven't been very concrete about how they think about e-commerce, and that's where they go wrong. If they're just going to take their existing business model and put it on the Web, it won't work."

He said the challenge for traditional retailers like M&S is in learning how to take advantage of interactive media. "(Marks & Spencer) is not a Web seller. They should think of this in a different way than their traditional business."

As a company with a huge, traditional revenue stream, it may be difficult for Marks & Spencer to motivate itself to jump into cyberspace with both feet -- witness how long it took to introduce credit cards. But if the company doesn't move quickly it could find itself being cut out of the online space by more agile rivals, Neufeld said: "If you don't do it now, one of your competitors will. Selfridges will steal your high-end market online, or an Internet pure play will come along and steal pieces of your market."

But Neufeld acknowledged that "bricks-and-mortar" retailers, especially in Europe, have had a dismal track record at getting online: out of the top 10 largest retailers in the European Union, 70 percent are not even selling online, he said.

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