China Consumer

Poor marks

M&S exits; Carrefour inks Tencent investment deal


“Here we are very confident… You don’t need to look much further than the queue [at these doors],” said Carl Leaver, then international director of Marks and Spencer, in 2008. He was commenting on the debut of the British retailer’s first store in mainland China – which was also its largest in Asia. It attracted hundreds of shoppers to Shanghai’s West Nanjing Road.

Leaver was expecting M&S’s expansion into the Middle Kingdom to yield returns within a few years. He originally planned to open 50 shops in the country but the project did not pan out as he wished.

Following its announcement in March 2015 that it was to close five outposts in Shanghai, the UK chain gradually pulled the plug on its 10 remaining stores on the mainland. The last vestige of its China foray was extinguished on January 12 when it shut its online shop on Alibaba’s – a presence that the company had vowed to protect as recently as two years ago.

M&S marks the latest foreign retailer to fail in China (WiC has catalogued their demise, with Home Depot and Best Buy being early casualties). Paradoxically China’s consumers are spending more, with retail sales growing 10% last year (see this week’s “Economy” section for more detail on the size of Chinese consumer spending versus the US, and why the headline figure for retail sales is a bit misleading). Online sales accounted for over 19% of the market, as it surged 32% over the same period.

M&S blamed its retreat from the world’s most promising retail market on “low brand awareness” among locals. But for a lot of Chinese, the UK label actually compares unfavourably to other foreign marques. “Its quality is a cut below Zara and H&M,” said a netizen. “You really need to have a good body frame to carry their clothes.”

Some complained about its style being old-fashioned and others added that it looked odd on Asians.

Analysts pointed out too that M&S failed because it did not manage to localise its offerings.

“The size of the majority of their garments was classified by European metrics – 6, 8,10,12, not ‘small,’ ‘medium,’‘large’ – which is what Chinese shoppers are familiar with,” Jiangsu Commercial Daily reported. “Above all, the names of different departments of their stores were never translated into Chinese for ease of direction.”

But many believed its gravest mistake was not making a bigger push in the food and beverage segment, where even in its home market the UK it has far more success. “Their knitwears and ties are not bad, but I prefer their biscuits,” said a netizen. Yet in its 4,000-square-foot flagship in Shanghai, three floors were devoted to clothing, with a far smaller space for food, a range of homewares and a cafe.

Other foreign giants are doubling down on their China expansion by choosing strong local partners. French hypermarket chain Carrefour has struck a cooperation deal with Tencent and Fuzhou-based Yonghui Superstores (which received $636 million of investment from Tencent in December) for its China operation. It believes Tencent’s expertise in data analysis could help it better target customers and push through its so-called omni-channel strategy.

Tencent will invest an undisclosed amount in Carrefour China – and in doing so escalate yet another field of battle in its ‘ecosystem war’ with Alibaba (see WiC391). The Hangzhou0-based e-commerce giant began its aggressive push into bricks and mortar retail in 2015.

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