Marks & Spencer plans Asian market thrust

IF an overseas retailer said it was hunting for two or three sites, each measuring between 40,000 and 50,000 square feet, in Hong Kong's prime shopping districts, you would be tempted to think it was mad. Particularly since this retailer has seven stores in Hong Kong and is on the verge of opening another - amid a retail slump. The retailer is no less than Marks & Spencer (M & S), a steady, stalwart on the high streets of Britain but an aggressive, expanding upstart in Asian shopping malls. Last week it opened a representative office in Shanghai. Next week heralds its fourth store in Bangkok and next month, its eighth here. South Korea may soon see a franchise, Singapore will soon see more space. Taiwan and Australia may be next on the agenda. For a cautious firm Marks & Sparks, as the British affectionately call the store that keeps 15 million of them a week in everything from brassieres to sandwiches, is living life at a hectic pace. At its Tsim Sha Tsui headquarters, the talk is all five-year plans and through-trains. 'It's not how do we capture sales,' said Paul Smith, regional chief executive for Asia Pacific. 'We are having to put the brakes on.' Since its arrival in Hong Kong eight years ago, when it initially erred in offering too many expatriate-sized clothes, its mix of cheap, good quality products has caught on fast with shoppers not obsessed with expensive brand names. In the process, its house label, St Michael, may actually have won a cachet of its own, as it has in Paris, where the French have embraced les rosbifs from M & S with gusto. 'It's very interesting that in Asia and France I think we have a brand-label consciousness that we don't have in [Britain],' Mr Smith said. Maybe it has something to do with the more upmarket shopping bags it gives its Asian customers, part of a subtle ploy to market its name more vigorously. 'We always use a small 'm' and drop our voice at M & S when we mention marketing but you do have to do it to get the message across,' he said. 'Just because a lot of middle-class Chinese girls wore M & S knickers 10 years ago, it would be absolute arrogant nonsense to assume when we really started going for the market, the whole Chinese population had heard of us.' But, different bags, a few more size 30AA brassieres and some tailored shirts are about the only concessions M & S makes to its fans in Asia. The rest of its lines are the same from Marble Arch to Sha Tin. Mr Smith said the retailer did not buy particularly for the Asian market but whatever sold well in Britain. He cited statistics such as the 85 million pairs of women's knickers M & S sold last year. 'Of course if you've got 40 per cent of the British lingerie business the value you can offer is outstanding,' he said. But not just lingerie sells well in Hong Kong. Every week more than 300 Italian men's suits go out the door at prices that range up to $4,200. Most other European suits start at about $6,000. Mr Smith said the group was more attuned to the swings of fashion than it used to be, though it would always stock more navy blazers than hot pants. He boasts that it even 'pipped' Giorgio Armani to the sage and peach colour palate by two weeks this summer. The more market-conscious approach also extends to other products. In the next few weeks it will launch a range of its own-label wines to replace frozen food. The strategy is working. Asian sales last year were up 25 per cent to $866 million while profits rose 15 per cent to $214 million. Returns on capital in Hong Kong were 'out of sight', and the firm had 'very significant' growth this year, Mr Smith said. But in Hong Kong - the only Asian city where M & S wholly owns rather than franchises its stores - it has its problems. One of them is training and retaining staff. Another is finding stores of the appropriate size. Its latest store in Queen's Road, Central, may be in a prime location but at about 15,000 sq ft it is small. Jim McDonald, director of retail operations, said he wanted a significant amount of footage in the next few years. But finding such large premises in its preferred locations of Central, Causeway Bay and Kowloon has not been easy. 'We intend to make our stores bigger,' he said. 'We are looking to make a major statement in Hong Kong.' By 2000 it hopes to have about 14 to 15 stores in Hong Kong, and is looking for more manufacturing sites: it sources just seven per cent of its products from Asia. 'We're more optimistic about the next few years here than most people,' Mr McDonald said.