UK retailer Marks & Spencer withdraws from mainland China market

PUBLISHED : Tuesday, 08 November, 2016, 9:27pm
UPDATED : Tuesday, 08 November, 2016, 10:58pm

Marks & Spencer Group will withdraw from the Chinese mainland, announcing it would close all of its 10 stores in the country amid continuing China losses by the UK-based retailer.

“Our review has shown that our stores in mainland China continue to make losses and as a result we can no longer trade with a store presence in the Chinese market,” said Adam Colton, managing director of Greater China for Marks & Spencer.

“Unclear branding positioning” is mainly to blame for the store closures, said Hanna Li Wai-han, a strategist at UOB Kay Hian (Hong Kong).

“M&S seems not attractive or competitive no matter whether its regarding its brand, quality or price. It is not surprising for me to see store closures or business restructuring,” Li said. “ The development of e-commerce in mainland China also puts pressure on M&S’s Chinese business operations as online shopping provides diversified channels for Chinese customers to global brands.”

Jack Chuang, OC&C Strategy Consultants’ Greater China partner echoed the view, saying “lack of localisation” could be one of the “root causes” for the retailers poor performance in overseas markets.

Taking China as an example, “M&S made a couple of mistakes around not adapting to the market, not only in assortment, but also store format, or even the overall proposition and target consumers,” Chuang said.

For assortment, the retailer failed to tailor its apparel products to Chinese body shapes and style preferences while for store format, it stuck to the huge department store format similar to the UK but wasn’t able to capture enough traffic without the best locations in China, he added.

Including 10 stores on the Chinese mainland, a total of 53 wholly-owned stores in 10 international markets will be closed, while 30 outlets in the UK home base will be shuttered.

However, M&S chief executive Steve Rowe, who took up the top job in April, said the retailer plans to open 200 new Simply Food shops as part of its restructuring turnaround plans, reducing reliance on the clothing arm.

Li said “more reliance on food sales will be a good try for M&S as the retailer has a stronger competitive advantage of food offerings compared with the apparel category”.

Chuang added: “It is a good change to increase food sales where M&S’s core competency is.”

Chuang also said it wouldn’t be surprising if there were more closures of M&S wholly-owned foreign stores as Rowe said in the future the retailer would concentrate on working with franchise partners rather than owning its own stores in international markets.