Jenny Chan 陳詠欣
Apr 9, 2018

Marks & Spencer's ill-omened ending in China began a decade ago

BRAND HEALTH CHECK: 10 years after it launched, Marks & Spencer finally retreated from China in January this year. What went wrong?

Interior of the Marks & Spencer flagship store in Shanghai, taken on 9 October 2008
Interior of the Marks & Spencer flagship store in Shanghai, taken on 9 October 2008

Marks & Spencer (M&S), or Ma Sha Bai Huo (literally: Horse Tree Department Store in Chinese), launched its very first flagship store in mainland China to a rather inauspicious start. Just four days after its October 2008 opening, a young Indian shopper named Shah Harshit fell to his death from an escalator on the fourth floor of the store on West Nanjing Road in Shanghai.

Nothing quite so unpropitious happened in 2010, when the British retailer opened its second store at Yu Fashion Garden in Shanghai, but fast forward to 2015 and Marks & Spencer's store-closing spree in China was beginning. It would close five stores (out of a total of 15) following a review of its plans for the mainland market. At that time, Bruce Findlay, the brand's regional director for Asia, also quit the firm after less than two years in the role.

In 2016, M&S announced that all its remaining 10 stores had to be shuttered amid continuing losses. The brand kept its online presence on JD and Tmall, but even the last e-store came to an ill-fated end in early 2018. 

It's a little-known fact that in its early days, M&S was manufacturing all of its clothes for the UK inside a China tax-free zone. When the brand opened its brick-and-mortar doors in China, it shipped the China-manufactured clothes back to the UK, and from the UK imported them back to China, essentially paying VAT two times, according to sources with knowledge of the matter. This clearly hindered the brand's pricing.

The retailer also aimed to position itself as a fashion label in China's hypercompetitive fashion scene, against the advice of sources who took part in past M&S pitches, Campaign Asia-Pacific has learnt.

Marks & Spencer declined to comment on this article, saying: "As we no longer operate in China, this opportunity isn’t really relevant for us." 

We asked two experts, one of whom formerly worked at the brand, to examine Marks & Spencer's China operations in the past decade from two angles: cultural insights and retail strategy.


JULIEN LAPKA

Founder

Inner Chapter

Firstly, from the cultural-radar side of things, I think Marks & Spencer completely misread how feminised the fashion industry is in China. Chinese women are looking for items that amplify their femininity and cuts that accentuate their curves. A lot of analysis focused on the products having the wrong sizes for smaller Chinese figures, but that’s missing the point. Most of the M&S products were straight fits. It's a rather obvious flaw, but they were bringing in conservative designs for 35- to 45-year-old women. The cutting was a massive issue. 

Streetwear brands can get away with cuts that don’t accentuate hips, for example, but M&S wanted to compete with the likes of Zara and H&M that have done a lot of work about how Chinese female consumers want to present themselves.

When Chinese white-collar women are at work, there is often unsaid competition in terms of looks. It’s a matter of ‘Hey, look at me, I've discovered this new brand’.

Even in the sports clothing industry, Nike and Adidas have all tailored their outdoor and sportswear designs to the local market to be more curvy and body-hugging.

There was another thing they got wrong, too. As a British brand, there is potentially a lot of scope to play up the element of Britishness, as long as there isn't too much focus on heritage (i.e. looking backwards). China is extremely progressive, future-facing and thrives on innovation. While it’s okay to talk about brand heritage, it’s important to show the Chinese how that heritage has brought them into a contemporary setting.

What is Britishness? You obviously have all the stuff about the Queen, polite society, Cambridge and higher education. That’s all fine. They can be shorthand for quality and stature.

But there is another side of Britishness that is overlooked—that is creativity and a certain wit. A lot of the white-collar Chinese women that M&S was trying to target will know about British art or Paul Smith’s design quirks. So I feel that M&S has missed out on an opportunity to portray those.

The brand also didn't take into account how fast fashion works in China. Its expectations were that Chinese women’s points of reference for fashion are going to be in the context of last year from mainly what happens in London and Paris fashion shows. That, again, is missing the point. Places like Seoul, Tokyo and Hong Kong will have a much greater influence in terms of creating designs but also setting paces in China.

It’s a very euro-centric approach to think whatever worked in the UK would automatically work in China. If M&S was not going to change their designs to accommodate the local market, I guess that's a pity. It showed the extent of whether a company was really serious or not about making it in China, and its attitude (or arrogance).

If I were to prescribe a cure: if M&S were to continue having a much more conservative product mix, then I would actually pitch it to the slightly older segment: women in their early 40s to whom it would have been much better suited.

Global demographics charts show that every market has an ageing population. Maybe, some of these brands should become the go-to brands for 45- to 65-year-olds and not just cater to the younger ones. But of course, that has to do with overall corporate strategy.

Finally, in their food section, M&S was selling a lot of canned and pre-packaged British goods such as Marmite and other extremely foreign food products, but they needed to explain how to actually cook with them.

M&S is absolutely out of step with understanding the competition or getting people excited

If you ask me, there's a tremendous amount of status-building opportunities from the trend of cooking and entertaining guests at home in China. The firm could have tapped into the cultural curiosity of being able to pay for and duplicate a British dish seen abroad right there at a Chinese home, but they would have to create a fuller retail experience with cooking classes and an online hub for sharing Western cooking recipes. They didn't do that.

They were literally only catering to the British expats for nostalgic reasons, so what is the point of opening in China? There are so many other foreign supermarkets in China that have been bringing in foreign food products anyway, so M&S is absolutely out of step with understanding the competition or getting people excited.

M&S was already having problems in the UK even 10 years ago when I was working there [at Flamingo in London]. We were getting loads of briefs from M&S needing to rejuvenate its brand. It was a decade ago; I feel nothing much has changed.

I remember when we went to one of the M&S briefing sessions, we had told them all the issues with their style, fits and price, and their answer was: "Yes, we know all that, but could you make the current offerings work?" We never worked on any projects or finished any work as they got cancelled. We were told that M&S headquarters was revisiting its strategy and we never ever heard back.

Obviously, I don’t know the inner workings of M&S management, but you can get a good feeling from these experiences and contrast that with the level of commitment that other brands have for China.


PASCAL MARTIN

Partner

OC&C Strategy Consultants

[Editor's note: Martin was Marks & Spencer's regional director for Asia from January 2012 to November 2013, when he was supporting the growth of 130+ stores in China, Hong Kong, India and Southeast Asia, as well as the launch of M&S’s e-commerce site in China.]

When a brand decides to leave a particular market, there is always an impact on its reputation. People get disappointed that they cannot buy the brand anymore. This did not only happen in China for M&S. It also happened in France where M&S left the French market twice, the second time for the same reason as in China.

One thing I want to emphasise is that there is no reason to comment on M&S's decision to leave China in a negative way. It is just a mature, responsible decision made in a context of limited overall resources and as a matter of prioritisation.

China required large long-term investments in all aspects of the business (product, communications, store expansion, internet) before getting a return. And M&S had other major projects that also required a lot of investment, like the development of their e-commerce platform and logistics in the UK. They could not do everything at the same time and chose to invest in the capabilities that seemed to give them the best likely return in the long run.

The possibility of the Marks & Spencer brand re-entering China under a different business model is there. Many brands operate in China through a cross-border e-commerce model. Therefore it is conceivable that Chinese customers who like the M&S brand may wish to shop on marksandspencer.com and get M&S goods delivered directly from the UK. I am not sure if the brand's website supports deliveries to China yet, but if it does not, it would not be very difficult to make this happen: M&S goods can already be shipped directly from the UK to Australian customers.

M&S did not have a lot of brand equity in China because the number of physical M&S stores was never very big (15 stores only). In a recent OC&C research report, we showed that there is a strong correlation between brand equity and the number of stores that a brand has opened in China. Even with the growing importance of the e-commerce channel, stores remain the key brand experience driver for retailers, and therefore the key contributor to brand awareness.

M&S's decision to leave China is just a mature, responsible decision made in a context of limited overall resources.

When it comes to marketing communications, in general retailers like M&S consider that the storefront (windows, imagery, visual merchandising) is their main communication medium. Another retailer, Zara, is famous for not investing in advertising at all. Therefore it is not surprising that M&S did not spend a lot on communications in China, apart from events with celebrities and limited campaigns to support store openings. Then, after the decision was made to leave China, it was even less of a priority to invest in communications.

In the UK, where M&S is much more active in the local media, the brand leverages the full range of communication channels, from TV to the internet.

Source:
Campaign China

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