As the successful partnership between Marks and Spencer and BP reached its centenary last month with the opening of the 100th Simply Food concept in a BP Connect store, the oil company announced a potentially exciting development, which could see the M&S brand installed across many dealer forecourts.
BP is to run a pilot of the M&S franchise format with a carefully chosen - as yet undisclosed - independent retailer. The project is likely to get underway in the new year.
BP and M&S started the initial trial of M&S Simply Food at two BP Connect sites in October 2005, extending that to 11 sites during 2006 before it was rolled out across the network of BP Connect sites in England and Scotland. Last year 64 were opened, and this year 41, with the expectation of eventually having 200 sites across the UK. Further expansion, however, is likely to come from the independent sector.
Karen Hubbard, BP’s UK convenience retail director, says there had always been an agreement with M&S that BP would trial the franchising of its brand with dealers.
"M&S is very pleased with the way the relationship is going with BP - I think it’s working well for both parties - and would like to extend it further. But we don’t have company owned locations right across the UK," she explains. In the past few years the company has sold off a considerable number of sites as it focused on its owned network in the south east and central Scotland. Extending BP’s network is therefore not an option. However Hubbard acknowledges the "fantastic independent operators" within the BP dealer network and is confident they could deliver the M&S offer to the required high standards.
"We always said that to be able to extend coverage of the network across the UK, it would have to be through franchising. The M&S relationship would be with BP, and because we really understand now how to deliver the offer, we would work with dealers to help them do that. We would maintain a single offer across the entire business comprising a BP forecourt, a Connect shop with a Wild Bean Café, and an M&S Simply Food."
For the past six months or so the company has been looking for in-fill locations - where neither company is represented. That includes some parts of the south east such as Kent where there are still opportunities for the BP/M&S Simply Food offer.
However the franchise is not for the fainthearted, warns Hubbard: "It is not an easy operation - in fact I would say it’s probably one of the most complex of operations, because you have the complexity of fuel with Wild Bean, as well as M&S. And M&S - rightly so - is very protective of its brand."
In-store for example, the BP side of the operation uses a pull-ordering system while M&S uses a push-ordering system: "Imagine the sales assistant looking at a crisp fixture," explains Hubbard. "Half will automatically be sent to him and half he will have to order through centralised ordering.
"The other thing dealers may struggle with is that the agreement is very tight. M&S controls the whole chilled sector, and other areas such as red wine. So if a dealer is used to bringing in a particular product for a customer this could be difficult - independent retailers are much better at getting close to their community than we’re able to under the current arrangement. That’s why we’re keen to do a pilot and work with a well-respected independent dealer and test all the possible permutations.
"M&S wants us to be able to demonstrate that as well as managing the franchise, we can ensure that an independent retailer operates the store to the same brand standards as a company operation, and that’s really what the pilot is all about. That’s why we have spent so long deciding on the right dealer. It’s been tough because there are some great independent retailers who run really good shops, but we felt they may not be comfortable handing their stores over to M&S. A lot of independent retailers understand their local customers really well, and would tweak the offer, at least for their local market. Currently with M&S, it’s pretty much M&S ready meals, M&S red wine, and there are a lot of independent retailers who would find that too restrictive.
"In the pilot we also need to demonstrate that the independent retailer is able to work through and see there could be a bigger prize for him. We have had a lot of interest from dealers and have had some very honest conversations with them. Some have said they love the M&S offer, but would want to bring their own products in, so are not keen to trial it themselves - although they’re very interested to see how it goes."
Dealer selection is almost complete. BP compiled its own shortlist of dealers which it handed over to M&S for the final selection. The chosen dealer will be revealed at the BP convention in November. Surprisingly the site will not, as one might have thought, already have a Connect/Wild Bean franchise. The emphasis was on getting the right retailer and working with him or her to develop the operation, says Hubbard. However, down the line, all being well, some of those stores that currently have Connect/Wild Bean franchises are expected to take on the M&S offer.
"For the trial we want to open a great store with a great turnover to work out all the possible issues we could encounter," explains Hubbard. "Whereas if we took an average site for the pilot we think it may not work through all the issues that may arise."
Hubbard says the franchise will be a slightly different deal to the existing one: "The financial model is what we’re currently working through with the independent retailer - there’s got to be enough money in it. We need to see what the build cost for an independent dealer is going to be; how we remunerate that asset and what the dealer expectation is. BP Convenience Retail will support the dealer. They will have a dedicated field resource that call on their store weekly - we’ll work with them to make sure they’re compliant with M&S standards. We will continue to supply all their branded offer, and clearly we need to be remunerated for that aspect.
"With M&S it’s pretty much the same financial deal we get so there’s no difference to the arrangement they would have with any of our other Connects. The key thing is that BP will manage the interface between M&S and the independent retailer, although M&S representatives will be directly involved with the operation on site.
"We’ll open the books to some extent. The retailer will see what’s happened to our stores - particularly the ones that have worked really well. The stores are a success, but of course there’s been one or two that haven’t achieved the expectations we would have liked. We have a lot of experience of where it works, where it doesn’t work, what the costs are associated with it - we’ll be sharing all of that with the independent retailer to make sure both parties make the right decisions."
The dealer will finance the development of the store, but Hubbard says the team will work closely with the retailer and there will be a lot of shared expertise: "That’s why it’s really critical that we work with the right person, and that we’re able to learn from both sides and develop the offer going forward. One of the lessons we’ve learnt is that at times it’s better to go slowly and make sure you’ve got it all right - to make sure the retailer goes in with the full knowledge of the things we’ve learnt from opening more than 100 sites. Ultimately I’m really confident independent dealers will see this as a great way to have a leading edge offer on their forecourts that will really take them into the future."