By  on October 3, 2008

SHANGHAI — A day after the People’s Republic of China celebrated the 59th anniversary of its founding on Oct. 1, the country got a taste of something completely different in the form of British heritage as embodied by Marks & Spencer. The U.K. retailer opened its first flagship Thursday on Shanghai’s Nanjing Xi Lu, and the slowing global economy seemed to little diminish the crowd of curious shoppers.

Prior to the store’s opening, Marks & Spencer staged an outdoor fashion show in the Wujiang Lu pedestrian street, a food district that runs behind the store.

The 40,000-square-foot store is Marks & Spencer’s largest in Asia. The first two floors are given over to women’s wear, including lingerie. The third floor offers men’s lines, and the fourth floor contains grocery, a cafe, children’s wear, and home and stationery sections. The fifth and sixth floors contain the company’s retail and sourcing offices. The store was nearly a year in preparation, recalled Richard Sweet, managing director of Marks & Spencer China.

“On Oct. 9, 2007, I stood outside of this store for the first time, and we’ve gone from one employee to 130 in a year,” he said. Of those, 30 are office staff and 100 are retail, and “only four are expats; the rest are Chinese, mostly Shanghainese.”

The company chose the location because, “Shanghai is an economic center and a fashion center. Within Shanghai, Nanjing Lu is a famous shopping center,” said Sweet. “Shanghai consumers are very discerning, demanding and price-conscious.…All the big retailers have appeared in Shanghai over the past 18 months.”

While a local expatriate population more familiar with the company “helps us to have a rolling start, that is ephemeral as it does not produce a consumer base. What we need is the raw Chinese base,” he added.

Marks & Spencer also this week opened its 10th store in Hong Kong, where it has had stores for 20 years. Business proved less successful in Taiwan, where the company shuttered its three stores. Sweet detailed that “30 percent of our Hong Kong shoppers are Mainland Chinese. They are mostly men who buy cotton polo shirts, formal trousers in gray or black, shoes and tailored shirts. Mainland women in Hong Kong are more diverse, but they love our biscuits, savories, and confectionary.”

However, despite earlier talk of the debut Shanghai store spearheading a rollout of up to 50 stores throughout China, “we are very much with our toe in the water, and will see how it goes,” a spokeswoman said. Elsewhere, the company is planning 50 stores in Greece and the Balkans, 30 in Central and Eastern Europe, and 50 in India in upcoming years, all through partnerships. The Shanghai store is fully owned, a decision Sweet claimed was driven by wanting to get a better feel for the local business, such as redoing experiments in sizing it previously conducted in Hong Kong. “We’re very excited about China, but are keeping our excitement in check for now. It has the infrastructure and the spending power,” Sweet said.

Aiming at reaching the vaguely defined Chinese middle class, the store offers a broad range of price points. While many midrange international brands opt to bundle tariffs into higher Mainland prices, Marks & Spencer has opted to keep prices on par with international levels, said Sweet. He specified the company sources 30 percent of its nonfood general merchandise from China, and 40 percent total from China, but, “of our Chinese factories, a significant number have licenses only for export. If this store is successful, there is a huge opportunity for direct business. It adds 16.5 to 17 percent to the price, which we absorb.”

British brands lack the same cachet in Shanghai as their French and Italian competitors, and Marks & Spencer lacks much preexisting brand-name recognition in China, but a massive advertising campaign is under way to change that. “We’re basing the local ads around our five cores. The first is about the fashion side, with Autograph as it has men’s and women’s,” said Sweet. “There definitely are positives to Britishness in China and in Shanghai. We stand for quality, service, value, innovation and trust — as well as for social responsibility. In China, there is an element of the British being trusted.”

He admitted that social responsibility campaigns were as hard to sell as Marmite in China, given a domestic tradition of false advertising and safety claims here. “Trust is an issue in China,” he said. “The core of what we do is the same everywhere, but each market has its own twists….No brand compels every customer. It is true that Shanghai is awash with clothing. It is up to us to deliver [our product] in a compelling way.”

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