“British Bloodline” Stumbles M&S in China

The well-established British department store Marks & Spencer （M&S） is to change its strategies of establishing outlets in Mainland China， after seeing the previous strategies work properly.

All these were revealed after a report about “M&S’s plan to close all stores in China” on April 2， it was reported that M&S disclosed its plan of closing all the outlets in China due to the operating problems in an investment event in France on April 1.

The report also said that M&S was going to stop running its stores in China directly； instead， it will find local partners to open new stores.

On April 8， M&S announced that the report contained “some translation errors”and M&S is going to stick to its development pattern in China. It also revealed the changes to the development plan in this country， in which no hints about “closing stores” can be found.

According to the new plan， M&S hopes to consolidate its position in the Chinese market and will continue to invest in China. It is going to set up new flagship stores in Beijing and Guang- zhou. Some of the second-class stores might be upgraded to the flagship stores too.

The changes of the development at least show that this British department store failed to fit into the Chinese market in the past seven years.

M&S was founded in Leeds， Great Britain in 1884 and now is headquartered in London. It is an international costume and food retail enterprise with more than 1000 stores in 45 countries. However， it did not enter China until 2008 when it set up its first outlet in China a flagship store too in West Nanjing Road， Shanghai.

Seven years later， M&S now has seven outlets in Shanghai and to two stores in Changzhou. In addition， Qingdao， Wuhan， Ningbo， Jiangyin and Wenzhou each have a M&S outlet. Notably， M&S chose to directly expand from Shanghai to its neighboring second- and third-tier cities， a different pattern from other foreign department stores when it comes to the distribution in China.

“Generally speaking， foreign department stores usually choose the most internationalized cities in China if they decide to be there. Shanghai and Shenzhen will be their primary choices. After gaining a firm foothold in this place， they will consider to moving to the cities with both local features and international elements， such as Beijing and Guangzhou. Then they began to expand to the lesser yet the capital cities of different provinces， such as Hangzhou， Wuhan， Shenyang and so on. From there， they will move downward to other cities，” said Liu Hui， chief consultant at Jion Uni-retail in Beijing.

“It is a dangerous path to go to second-tier cities before settling down in major cities，” she added.

The changes M&S made to its strategies in China might be a result of its dawning on the “danger”.

Stephen Rayfield， managing director of M&S Greater China， admitted that the company was re-estimating the current structure of stores and might adjust the locations of the second-class stores in the neighboring area of Shanghai， which is also a move to get ready for the new flagship store.

When asked why it decided to get into Beijing and Guangzhou seven years later， M&S did not give out a clear answer； instead， it reiterated that its plan of changes covers the next three years， but there is no confirmed schedule for the change.

“Foreign department stores need time to get used to the Chinese market and the changing trend of Chinese consumers. This is actually a normal performance of the foreign department store in a certain period. During this period， making changes has nothing to feel strange about，” said Wang Liuhe， secretary-general of Shanghai Association of Department Stores.

Compared with other department stores in Shanghai， M&S， as reviewed by Wang Liuhe to “have smaller sites than others” and “give priority to self-branded products”. “It has fewer categories of products， which are not cheap at all. Therefore， it does not have a big name among the consumers in Shanghai and thus has limited influences.”

But M&S did not think so.

It kept stressing that its flagship stores in Shanghai “never missed excellent business performance”. According to the financial report published this January， it kept a good international business last year as the overall sales amount increased by 4.5%. The Chinese market realized the double-digit growth it did not reveal the detailed growth rate in China， though.

Not Fitting China

When M&S got into Shanghai in 2008， Wang Liuhe once said that it would not succeed here if it just copied its pattern in foreign countries into Shanghai. Now， it really fell into that maze， at least in some consumers’ eyes.

West Nanjing Road is one of the busiest commercial blocks in Shanghai. It is said that the flagship store of M&S is the biggest one of this company in Asia. Its total area reaches 3800 square meters and has four floors. The first and second floors accommodate the counters of women’s costumes； the men’s clothes can be bought on the third floor while the fourth floor is covered with retailers of children’s apparels， restaurants and cafeterias.

When the store was opened， someone described this like this： the store followed the usual style of M&S in the world. The precious British elements still dominated the decoration as the steady dark green and brick-red were the main hues of the store， which was bright and had the shelves scattered around. The design is completely different from the counter-based sales pattern and all the products sold there are tagged with the self-owned brands of M&S.

However， this globally uniform style of M&S did not win too much favor of Chinese consumers. The store was opened during the National Day Holiday of China （October 1-7）， which is usually a golden period for shopping. In the morning the store was filled with curious people but the number of visitors greatly reduced in the afternoon.

“Compared with the stores of GAP and H&M， the number of visitors in M&S is much smaller.” A white collar working in a mansion close to M&S’s flagship store in West Nanjing Road described the status quo of M&S like this. She visited the shop many times， which was actually a stopover for her since she always visited all the stores in that area at one time.

The more she visited M&S， the stronger feeling she had that the size and style of clothes sold in M&S fit the Europeans and Americans better than Chinese because it is generally bigger than average clothes. The quality is good but the price is too high given the brand awareness of M&S in China. In another word， the cost-performance is not satisfactory. The food sold here is not love of Chinese people since very few are used to the dishes full of foreign flavors. Therefore， most of its consumers are foreigners.

A senior manager of a Shanghaibased company shared the same feeling with the white collar. She thought M&S to be a “high-end department store featuring the British style， but is not appealing enough in China”. “The major consumers in China are young men， who prefer ‘busy’ and ‘lively’ place. M&S， however， is thought to be too quiet. The products inside are far from the major consumers in both the style and price. They are more like things for men and women older than 40.”

She once spent over 100 yuan on some food sold by M&S. “But my family did not like the taste. M&S’s food possibly keeps the British local flavors in style and taste，” she said.

Naturally， there are people who prefer the British style. In Dazhong Review， a popular online platform for reviewing food and restaurants in Shanghai， the food of M&S won several positive remarks. Some people claimed that they like visiting the fourth floor with food retailers in the store of M&S in West Nanjing Road； however， they still complained that there were fewer categories of food there than the counterparts in foreign countries.

Actually， the food is thought to be the best product not only in China， but also in the UK. An overseas student in the UK said that M&S has two kinds of stores in its homeland： one is the department store that sells a large quantity of products and the other one consists of supermarkets and fast-food restaurants that sell food. The department stores are usually located in CBDs while the supermarkets and fast-food restaurants usually stand close to big railway stations. “Consumers can buy sandwiches， pasta and coffee there easily，” she said. “There are a lot of things there”.

“The food and apparels of M&S have high quality and target the middleand high-end market. It has a lot of consumers in the UK，” she added. She went there mostly for the food. In her opinion， the food is why M&S could have good performance in UK. As for the clothes， “people older than 40 with good income might like them.”

“Apparently， M&S did not bring its own feature the food to Shanghai， a solid proof for its failure to get used to the Chinese market，” said Wang Liuhe.

In 2012， M&S opened its 8th store in China. It is also located in Shanghai，but it is quite different from the previous ones in both the categories of food and the style of costumes. It reveals that M&S is trying to adjust itself to the Chinese market. Pitifully， there are only one or two stores that have the changes. The other stores are not even mentioned multiply by the insiders of M&S.

The Problems Remain

The biggest difference between M&S and other department stores is the fact that it only sells the products of its own brands. This is considered to be the key for M&S to succeed in the world not work in China.

In 2007， Itokin， a Japanese department store known for selling its own products， finally close all stores in China and quitted the Chinese market after running business in China for ten years and having 200 stores maximally. The analysts contributed the failure of Itokin to “its lack of expertise in the business of department stores and having a lot of shortages from the positioning of the stores to the localization”

The positioning of stores and localization are just where M&S is confronted with problems at this moment.

Liu Hui said that there were always disputes about the self-owned brands in the sector of department store. “Chinese people attach great importance to the brand awareness， which could play an important role in making consumers decide to buy a certain brand. M&S hopes to make of its brand as a department store to cover the sectors of clothes and food. However， M&S is not good at marketing in China since it knows very little of the marketing methods in this country. Therefore， it does not have high brand awareness among Chinese consumers，” Liu Hui said.

M&S China， probably feeling the discomfort in the Chinese market， said that it would find a local partner to promote the business development there.

However， Liu Hui believed that such an action could not change its status quo. “The bad performance has nothing to do with having local partners or not. The problem lies with its own brand and the British culture that is hard to be exported，” he stressed.

A proof for his saying is that it once tried to set foot in Taiwan before getting into Shanghai. At the beginning of 2007， it worked with 7-11， a Taiwanbased retail company， and established three stores. However， it quitted the Taiwanese market one year and a half later due to the underperformance. When asked about the reason of failure， M&S admitted its sales pattern without counters and its British style could not be accepted by most of the Taiwanese consumers.

It is no accident for M&S to have an unpleasant experience in Taiwan.

Actually， most of the stores of M&S outside the UK did not have smooth development before getting into Shanghai. “It once had over 200 stores in the overseas markets， most of which were located in Europe， Middle and Far East in the form of franchise. It met numerous failures in its efforts to set foot in the U.S. market and closed all the stores in France and Canada. All the unsuccessful cases can be explained with same reasons： the lofty price， the protruding British culture， the simple styles， bigger size and slow update.”

Even in Hong Kong， which had been the colony of the UK for over one century， M&S met the similar problems. A businessman from Hong Kong recalled that “the British department store went through the process from zenith to wane in Hong Kong many years ago”. In 2001， M&S planned to turn all directly-owned stores in Hong Kong into franchised ones， and claimed to end its business in Hong Kong if no proper partners could be found.

Nowadays， M&S had the same idea in Mainland China. Even though“looking for partners” and “turning to franchise” sound different， it is actually the same thing. Does this mean that M&S did meet problems in its business in China？ We might find some answers from its previous actions.