In Markets

3 reasons Marks & Spencer failed in China

marks-spencer-store-singapore

Whatever happened to the great Chinese consumer? It’s a question executives at Marks & Spencer Group Plc are asking themselves as the British retailer moves to shutter its 10 stores in China.

The answer is that they’re still around, but are shifting more toward domestic brands, and online.

Domestic brand shift

A recent study of fast moving consumer-goods sales by Bain & Co. found that even as China’s economic slowdown weighs on consumption, foreign firms are faring worse than home-grown ones.

SEE ALSO: Marks & Spencer to shutter UK and China stores

International-brand sales in 26 categories from shampoo to beer shrank 1.4 percent last year. Sales of local brands, typically quicker to adapt to shifting tastes, rose 7.8 percent.

Lack of understanding

Marks & Spencer’s other mistake — outside of none-too-trendy clothes and some bad store locations — was a lack of basic understanding of the Chinese consumer. Many of their fashions didn’t even fit local body shapes, for example.

The London-headquartered group joins a growing list of Western retailers, including supermarket chain Tesco Plc and Best Buy Co., that have tried to cater to China’s mass market, and failed. Marks & Spencer’s international ambitions will now be limited to franchises and profitable stores in Ireland, the Czech Republic and Hong Kong.

Weak online presence

The retailer’s departure also marks a bigger lesson for mid-tier foreign players seeking a piece of the China consumer pie.

An internet presence is crucial —  20 percent of China’s retail is already online — and without a local partner, companies will have a tough time getting inside the heads of the nation’s aspirational middle class. Unless your proposition is unique, like Starbucks Corp. or the cosmetics of South Korea’s Amorepacific Corp., it’s an uphill battle.

For some of the world’s biggest brands, the quest to win over China’s consumer is getting a lot harder.

(Source: Bloomberg)

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