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SCMP Reporter

BRITISH retail giant Marks & Spencer is considering expanding its operations into China. ''The sheer size of the market can't help, but excite any retailer,'' said Colin Buchanan, director of operations and development for the Asia-Pacific region.

  Mr Buchanan, however, is quick to point out that Marks & Spencer, is not going to ''leap into the China market tomorrow''.

  ''There are many significant challenges to overcome before we take our first step,'' he said.

  ''One is establishing an effective supply chain. We can move goods around the world in a few hours. In China, you have a problem of moving goods 200 kilometres down the road. That is just one of the challenges.

  ''But, having said that, China is changing almost daily and I think that is something not many people in Europe fully appreciate.

  ''China is a big opportunity and one which, I believe, we are better placed to move into with the lessons we have learned from Hongkong,'' he said.

  ''China should not be considered one country, but rather a number of countries and, as in any rapidly-expanding economy, there will be some good times and some bad.''   Marks & Spencer's move into the Asian market began six years ago with the opening of its Ocean Terminal store.

  In Britain, Marks & Spencer became a household name for its underwear, as well as its food lines.

  But in Hongkong the shop was viewed, initially, as catering for an expatriate market.

  In the first year of operation in Hongkong, the company recorded a pre-tax loss of $4 million, but managed to turn that deficit into a pre-tax profit of $95 million for the 1992-93 period.

  It is expected Marks & Spencer could achieve a pre-tax profit for 1993-94 of $120 million ''assuming all goes well'', said Mr Buchanan.

  Today, Marks & Spencer has five stores in Hongkong with franchised operations in Jakarta, Kuala Lumpur, Singapore and Manila, and another one opening shortly in Bangkok.

  It is wholly-owned subsidiary of Marks & Spencer plc, Britain's leading retailer, which recorded a group pre-tax profit last financial year of GBP737 million (HK$8.5 billion), up 25.1 per cent over the previous year.

  Mr Buchanan said the move into Asia was to ''gain experience''.

  ''We made some mistakes initially, but we managed to stand our ground and capitalise on them as we went along. One of our early mistakes was to open a store in Mongkok. It was a bad move. But also you had Tiananmen Square that year and, following that, the Gulf War.

  ''When we first opened in Ocean Terminal there was a lot of pent-up demand from expatriates, but, realistically, that market was never going to carry us in Hongkong. So we had to focus on the local clientele.

  ''Our first year, I will admit, was not good.''   A disaster? ''Not really,'' Mr Buchanan said.

  ''I tend to think of it more as a learning experience. It is all part of the Marks & Spencer philosophy . . . enter the market place, test the water, adapt, but always keep in mind the principles on which the company was founded.''   One of those principles, he said, was to offer customers a range of high-quality, well-designed and attractive merchandise at reasonable prices, under the company's own brand name, St Michael.

  Mr Buchanan said Marks & Spencer was well placed in Hongkong, described as being ''one of the most competitive retail markets in the world''.

  ''Our success as a company is based on quality and value and we have adapted that highly-successful concept to the local market,'' he said.

  ''Today, we are a reasonably-sized Hongkong retailer, and profitable. But, more importantly, we have achieved our position with mainly British-made goods.''   About 85 per cent of all Marks & Spencer goods sold in Hongkong under the St Michael brand name are sourced in Britain, although Mr Buchanan said this would change in time.

  ''High import duties in other Asian countries mean we have to look locally to source products, while keeping in mind our company's requirements for high quality at reasonable prices.''   Of the other Asian stores, the one which is proving the most successful is Manila.

  ''It is our biggest success story regionally. Profits have been increasing along with turnover at an incredible rate.''   Marks & Spencer has 15 million people a week walking through its doors in Britain, but, in Hongkong ''we have had to fight for everyone of our customers'', Mr Buchanan said.

  He said sizes of clothes had to be adapted to Asian frames with little variation on the range of clothing offered.

  ''Our lines are fairly universal. What sells well in Hongkong also sells well in Madrid, Paris or London. What we don't have is substantially different ranges for every country in we operate . . . it would become a very expensive operation if we did.''   He said Marks & Spencer was in the region for the long term.

  ''That is why we tend to take our time. We take a very prudent approach to development . . . step by step, ensuring good long-term growth.'' 



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