Marks & Spencer Quits China: A Company With No Ambition That Made Almost Every Mistake It Could

It got so much wrong that how it came to this is a mystery in itself.

In the mainland Chinese market, Marks & Spencer was the eccentric aunt almost nobody knew.

Over eight years it opened 15 large stores, one after another, and never built any brand awareness. It went head to head with fast fashion starting in 2008, and never changed its middle-aged taste in merchandise. Its food won broad praise, and its shelves were always full of items close to their expiration date. It had 132 years of British tradition, and never did anything with it.

On November 8, 2016, Marks & Spencer announced it would close every store on the Chinese mainland, including the one at The Place in Beijing, open for barely a year. That store was supposed to be the fruit of long, careful thinking about how to remake the China business — yet it carried every one of the old flaws, down to using English for its most important category signs.

In eight years on the mainland, Marks & Spencer never found the rhythm of doing the right thing at the right time. The usual explanation for its failure in China points to the squeeze from fast fashion and to e-commerce draining foot traffic. In fact neither was a serious threat when Marks & Spencer arrived — had it found a position of its own, it might well have had a shot.

Seen through today's talk of "consumption upgrading," the Marks & Spencer that opened on Shanghai's Nanjing West Road in 2008 counted as a fashionable place. Food imported from around the world, baked goods unlike anything from a local bakery, a deep and finely sorted wine list — enough to draw in style-conscious young members of the middle class. In that guise, squeezed among a cluster of fast-fashion brands, Marks & Spencer was nothing special in clothing. But as a spot for afternoon tea, or for stocking up on imported food, it had almost no rival on Wujiang Road, otherwise ringed by fast fashion and mid- to low-end restaurants.

Back then this format had few competitors. The only real match was City's Shop. But that fashionable place stayed tucked away on the top floor of its building, and its smartly decorated café never stopped being an afterthought, somewhere to rest after a round of the store. For years it did not add a single table or chair, and the coffee and sandwiches it sold on the side were never promoted under the idea of "afternoon tea." Which is to say: Marks & Spencer chose to fight fast fashion, which reinvented itself every few weeks, hand to hand, armed with nothing but its own overly dated clothes.

Globally, the decline was not a regional matter. Around the time it entered the mainland in 2008, it closed all its stores in Taiwan and pulled out, having failed to win over consumers used to the Japanese department-store format. And in 2014, at home in Britain, it was criticized for responding too slowly to fast fashion and e-commerce, and its results fell sharply. That year, general-merchandise sales, mostly clothing and footwear, dropped 1.4% year-on-year, largely cancelling out a 1.7% rise in food.

As for the news of this withdrawal from the mainland, the full statement runs: "Marks & Spencer plans to close all 53 wholly owned stores across ten markets, including its 10 stores in mainland China and 7 in France, as well as every store in Hungary, Lithuania, Poland, Slovakia, Romania, the Netherlands, Belgium and Estonia."

Marks & Spencer used to be the retailer that stood for "high-quality British goods" — at least until about ten years ago. Its model was to build up a handful of very large suppliers and sign long-term exclusive contracts with them, controlling costs, raising quality, and so widening margins.

Economic globalization hit that model hard. As much as 80% of what Marks & Spencer sold came from its own brand, St Michael. The suppliers meant to hold costs down instead slowed the company's response to the market, and its price advantage lost out to global production giants like Zara.

At the start of 2016, Marks & Spencer promoted Steve Rowe, previously executive director of the food division, to CEO. The new boss dropped his predecessor's goal of turning Marks & Spencer into a global retail group, chose to close most overseas stores outside Britain, and focused on joint ventures and franchises instead. Rowe argued that overseas markets were too small for Marks & Spencer, and that the company knew too little about them to make money there.

It did know too little. But a company that spends eight years in one market and still says it knows too little does not have a knowledge problem — it never tried to know. Unambitious is probably the best word for it.

Why Would a Department Store Fight Fast Fashion Hand to Hand?

Marks & Spencer's first mainland store, for a venerable British department store, sat on Nanjing West Road, one of Shanghai's liveliest shopping streets, where foot traffic is never short. But H&M and Gap flanked it, Uniqlo sat right behind, and Zara was close by. This was a shopping district ringed by fast fashion, which put Marks & Spencer into hand-to-hand combat with fast-fashion brands.

That choice of site caused a serious problem: plenty of shoppers took it for another fast-fashion label, or at least a clothing label, so when they found no "fashion" inside they walked out annoyed. Compared with the fast-fashion shops next door, the letdown felt even bigger.

Yet most of its China stores followed the same siting strategy. At Jiangqiao Wanda in Shanghai it again opened alongside Uniqlo, Zara and Vero Moda; at Wanda Plaza in Xinbei, Changzhou, in Jiangsu, it was surrounded by clothing brands — Zara, Bershka, Jack & Jones, Only. Never mind how fierce competition among fast-fashion brands already was: Marks & Spencer's clothes had almost nothing to do with fashion, and struggled to stir young shoppers at all.

Keeping Your British Roots Is Fine. Ignoring Chinese Shoppers Entirely Is Not.

Marks & Spencer's China stores kept a careful, sober British style. Unlike the leased-counter selling of traditional department stores, its shelves were open, and everything on them was own-brand, carrying the Marks & Spencer label. These were important reasons for its success elsewhere.

There is nothing wrong with keeping your British roots — much of the time they make a strong marketing weapon. But multinationals have spent years calling for "localization" for good reason. With Marks & Spencer, though, it is hard even to reach the question of whether it understood what Chinese shoppers wanted.

To stay consistent with the global business, the category signs inside its stores were entirely in English, with no Chinese. Even at the so-called second-generation store it opened at The Place in Beijing last year, supposedly adjusted for China, the clothing displays were still labeled mainly in English, with stiff, translationese Chinese underneath. "The Art of Giving," for example, came out as a flat, literal Chinese phrase meaning "the art of gifts."

When it started selling, Marks & Spencer did not switch its sizing to the S/M/L system Chinese shoppers knew either, insisting on European labels like 6, 8, 10 and 12 — and plenty of shoppers complained that European cuts ran too big.

Food Was the Real Draw. Why Lead With Clothing?

Because it treated clothing as the way into the market, it probably ended up picking sites right next to fast fashion. Yet in the handful of pieces QDaily has published about Marks & Spencer, most of the praise in reader comments went to the food.

When the news broke that Marks & Spencer was leaving China, young people on social media reacted with odd unanimity: those good black teas, potato chips, breakfast cereals and wines would never be found again.

Wang Yangkajia, who studied in Britain, called the wine range "the Uniqlo of wine": about a hundred yuan bought a decent red, good with a meal or turned into mulled wine or sangria. And in the three flagship stores in Shanghai and Beijing you could also find freshly baked bread of every kind, plus a coffee bar with a good view where you could sit and talk.

But food was never pushed as a core business in China. Even within its British revenue, Marks & Spencer's food brought in £5.4 billion in fiscal 2016, against £3.9 billion for clothing and homeware. Food sales rose 3.6% year-on-year; clothing fell 2.2%.

Among British department-store brands, Marks & Spencer was also well ahead in developing food. In the 1970s and '80s it was among the first to sell ready-to-eat items in its stores, such as chicken-breast-and-cream rolls and sandwiches, then expanded step by step into all kinds of own-brand packaged food.

Had Marks & Spencer laid out its China stores the way it lays out its British ones from the start, things might not have gone so badly. In its UK flagships, food and clothing take up roughly equal space, and a separate tier of small stores sells nothing but food. In 2015 the group even decided to open 250 stores in Britain over three years under Simply Food, its food-only sub-brand, to make up for more of the losses in clothing.

From now on, that kind of change will only be visible in its Hong Kong stores. This Christmas, the company plans its largest holiday food promotion there, and is opening three dedicated pop-up stores for it.

Chasing the Middle Class Without Value for Money

In its first few months on the mainland, Marks & Spencer's performance was, in the words of executive chairman Stuart Rose, "a mess" — enough that he had to go to Shanghai himself to sort out some "basic store management" problems.

He saw nothing wrong at the time with aiming at Chinese shoppers over 30. "Who's going to look after the ordinary middle class? Not all 1.2 billion Chinese people can afford to buy Louis Vuitton," he told the Financial Times.

Courting the middle class was in fact a shrewd decision, especially as China's middle class kept growing. But this is a group that cares a great deal about value for money, and on that Marks & Spencer had nothing to argue with.

In 2014 it was also called out at home in Britain for charging too much: in clothing, the average price gap with comparable goods from competitors reached 22%. Carry that pricing into China and, even though some shoppers might notice that the fabric was a cut above the ordinary clothing shop and that the store offered more trouser and sleeve lengths, tags of 500 to 3,000 yuan lost their pull fast without a hefty discount.

In clothing, the complaint heard most often about Uniqlo in China is also that it isn't fashionable. But look at what value for money got it.

Dull Merchandise — and Worse, Constant Stockouts and Missing Sizes

"Dated" is how many Chinese shoppers described Marks & Spencer. Since even sizes and labels had to follow one global standard, you can guess the merchandise followed it too, and that the China market was never treated differently according to what it wanted. Yet talk to any fast-fashion brand and they will all stress how much Chinese shoppers care about design and fashion.

Worse were the missing sizes and empty shelves, especially in the more popular food section, where gaps appeared again and again. Not the kind of problem you would expect from a company with a firm grip on its supply chain.

Unlike many department stores, which lease counters to outside brands, most of what Marks & Spencer sells is its own brand, and it handles many of the steps itself: sourcing fabric, development, design, production, selling. As early as 1926 it adopted a policy of buying direct from manufacturers, which cut out middlemen and lowered costs, and also let it control product quality as tightly as possible. At its British headquarters it keeps a dedicated sourcing center that can place production anywhere in the world according to what each category needs, then coordinate shipping the finished goods from wherever they are made.

In 2011 the company promised to fix these problems with changes to its supply chain: a local sourcing team to pick clothes better suited to Chinese shoppers; a new Shanghai warehouse that would deal directly with manufacturers and make better use of the global distribution center in Shenzhen; and a faster run from design to sale for Limited Collection, its more fashion-minded line.

Even now, none of it has been fully straightened out. Clothing shipped from overseas ran out of stock because customs took too long, and the e-commerce channels sent the wrong goods. Food with a short shelf life suffered most: let customs drag on and the goods reached the store already near their expiration date, to be marked down.

Indecisive: Either Too Late or Too Early

The financial crisis cut Marks & Spencer's profit by more than a third in fiscal 2008-2009; UK sales fell 1.1%, and only 23.9% growth in international markets lifted the overall figure to a 0.8% gain. The plan then was to raise international business to 15%-20% of revenue within five years, and much was expected of the Chinese mainland.

In September 2013, Marks & Spencer opened a Tmall flagship store for imported food and wine; by the end of that year it had a JD.com flagship too. These moves came a year or two ahead of its rivals in Europe and the United States.

But measured by the attention they actually drew, the moves were, if anything, a little early. Cross-border e-commerce only caught fire in China in mid-2014, when big platforms such as Tmall Global and JD Worldwide started inviting international brands in. Because they carried so many categories, foreign department-store and supermarket brands — Macy's, Costco, Metro, Sainsbury's — were for a while a priority to recruit, and nearly all of them got dedicated promotional slots during Double 11 and 618 in those two years.

It is worth imagining: if Marks & Spencer had led with food, built up shoppers in its physical stores first and then caught the e-commerce wave, would its fate in China have been different?

Not Yet Steady in Tier-1 Cities, It Jumped Into Trickier Tier-2 Ones

Test the water in Shanghai, move into tier-1 cities like Beijing and Guangzhou, spread to other provincial capitals through joint ventures or distributors, and finally push into more tier-2 and tier-3 cities — that is roughly the expansion plan nearly every foreign brand follows in China.

Marks & Spencer's expansion in the Yangtze River Delta has always been seen as a different route: after two stores in Shanghai, it went to nearby Ningbo and Changzhou, then on to Jiangyin, Wenzhou and Suzhou.

What it was trying to copy was the "flagship plus satellite towns" model that worked in London. It had not ignored the spending power and the risk of tier-2 cities, which is why it mostly went in as an anchor tenant at Wanda Plazas.

But look at how the categories were laid out and you would see nothing to tell these new-city stores from the smaller ones in Shanghai: modest in size, limited in range, prices just as high, clothes just as unfashionable, the food section given only a few shelves.

Little Brand Awareness, and Almost No Marketing

In highly international tier-1 cities such as Shanghai and Beijing, explaining Marks & Spencer was relatively easy. Plenty of foreigners live here, and plenty of people have studied or traveled in Britain, where it is hard to forget how dense Marks & Spencer is — more than 930 stores of all sizes, one within half an hour's drive wherever you are.

In the run-up to the winter holidays, the peak season for retail marketing, Marks & Spencer is never absent. We have written before about several of its British food ads: they may not match the industry's best, John Lewis, but some of the ideas are genuinely inventive. It also posts holiday how-to videos on YouTube, things like "How to dress your Christmas tree" and "An edible guide to cooking Christmas."

On the mainland, though, you rarely saw Marks & Spencer go on the offensive with advertising. What you got instead were routine in-store promotions, the most old-fashioned kind of email marketing, and repost-to-win contests on Weibo. Only for the opening of the Tmall flagship, and the opening of the Beijing flagship at The Place, did it "splurge" on outdoor and subway ads.

Beijing Was the Last Throw, and It Came Too Late

The upgraded boutique store it opened at The Place in 2015 was taken as a sign that Marks & Spencer had finally begun to understand something about what Chinese shoppers wanted:

It had come back to a tier-1 market with both a high degree of internationalization and real spending power. In this 1,500-square-meter flagship it fixed the clothing sizes, rearranged the zones, brought in better lighting, mirrors and displays, and enlarged the food section, raising the imported food it sold to more than 1,500 items.

When this second-generation store opened, Costas Antimissaris, president of Marks & Spencer's international division, said the model would be the basis for refitting its existing China stores. The company hoped that changing the goods and the displays would bring it closer to shoppers.

But the repeated adjustments of the previous few years, the closings and openings, had already left young shoppers with a muddled impression of the brand. They were not waiting — and besides, most of what it sold was easy to find somewhere else.

So What Was Marks & Spencer in China, Anyway?

Anyone who has seen Marks & Spencer in Britain gets a shock on returning to the mainland. In London, Marks & Spencer covers everything down to the last detail, from cheap clothes to a sandwich before you catch a train. Its advertising is elegant and stylish, and it never misses a holiday window or a special range.

But in China? Outside Hong Kong, which knows British culture well, even Marks & Spencer may not have an answer.

Cover image and in-text images: Wikimedia Commons, Marks and Spencer clock, Marks & Spencer, Brooklands