Mulberry Trebles Profits!

Tesco have just announced that UK sales were done by 0.9% in the last quarter.  That’s not too bad really, compared with many other famous UK brands (actually, it would be pretty embarrassing for them, if amongst all this economic doom and gloom they were making super profits, wouldn’t it?).  The list of companies reporting lower profits, or even worse, is getting longer by the day.  Tesco’s is just the latest in a series of recent business news that confirms what a horrible time we are all having of it.

Isn’t it then such a nice surprise to see, on the same day, the headline “Mulberry Trebles Profits As Demand Remains High”?  Well done Mulberry, but what might we learn from it?  I guess some of you will be saying that this is just more proof of what an economically polarised world we live in, whilst most of us are struggling to buy food, the rich are out there filling their wardrobes with fancy new handbags.

I have a different take on it.  The brands that are suffering today are mature and many have not been smart enough to adapt to the changing times, most notable the growth of disintermediation, that online shopping allows, and now suggests the prospect of a smaller higher street presence for many retailers (thank God!).

Of course, it is also the natural conscience of both maturity and scale.  Whilst Tesco has been very successful at differentiating itself, and exploiting benefits of scale and scope, primarily in food retailing, leaving the likes of Sainsburys in its wake for a while, Sainsburys has now caught up somewhat and you might be hard to state clearly what differentiates the top food retailers in this country today.  To my mind, they are not as distinctive as they once were and no matter how you dress it up competing on price is not that good an idea really.  Just look at M&S Food, they competed most notably on added value, not price.

Differentiation, having something clearly different to offer, is a primary source of value and without it you have little but price (and store location for the likes of Tesco) to compete on so perhaps it is hardly surprising that the heady days of rapid profit growth in the UK are over, for now at least, until the next innovation to hit the market.  A mature market is a mature market after all, recession or not.

There is also the question of demand.  I seriously doubt that we can eat any more, even with the ridiculous two-for-one offers that now seem to dominate our supermarket shelves.  (I LIVE ON MY OWN AND I ONLY WANT ONE!).  Whilst geographic and category diversification has been used to drive growth too it is debatable just how far that can go.

On the other hand, Mulberry is a distinctive British brand with less obvious competition, arguably operating in a less mature market, that doesn’t have to compete on price, because NONONE OFFERS THE SAME PRODUCT AS THEY DO.  An enviable combination of attributes dominated by a genuine uniqueness in a market where there is still excess demand.  (I just love those M&S adverts that say something like “It isn’t a chicken, it’s a so and so chicken” – quite brilliant really.)

Tesco and Mulberry are two very successful brands and, whilst Tesco is clearly worth considerably more than Mulberry, they are at very different stages in their life cycles, probably with different ambitions too.  Tesco’s problems are about maintaining their pole position in their market space; Mulberry is still chasing growth, very successfully.  If your business isn’t the market leader in your sector, yet, and you still want to grow further, maybe there is something you can learn from Mulberry?

Mark

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