M & S shutting down all the stores in China

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M & S shutting down all the stores in China

When retails are enjoying double 11 festival, the biggest department store of UK, Marks & spencer doesnt have the mood to enjoy. Following Tesco, B&Q, another big UK retailer say bye bye to Chinese
market, this will also effect our department store shelving company who have business relationship with M & S.

For JDSHELF, last year we also have Tesco project suspended and canceled, So, its really a good lesson for us, to foresee those department stores who have problems to avoid risk.


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Shutting down
 
M & S didnt hold the Chinese market at last
Quite recently, M & S Clearly announced they will close all the 10 stores in China. This means, this biggest international retail cooperation of UK who running business for 8 years on Chinese market, lost Chinese market on physical store level.
Actually, this is not a surprise. Recently M & S is stuck by negative news like decline in sales, reducing the staff, shutting down the shops, senior executive resigning, theres already have early warning.
Take shutting down the stores for example. M & S suspended the explosion of Russian market at the end of last year, then close the stores located in Croatia, Bulgaria, Montenegro, Serbia and Slovenia.
But this action is not so obviously because of the depression of Russian market and limited importance of other markets.
But the obvious shutting down plans are spread since August.
In August, theres some UK media point out, M & S suspending the plan of open shops in The Netherlands, and possibly will shutting down shops instead of expending intentional business, even include the flagship store on Avenue des Champs Elysees.
At the beginning of November, the news of shutting down shops come to China. Someone said M & S plan to shut down part of the stores in China, to support the companys financial plan of cutting down the cost.
The response from M & S is to keep silence, and keep saying this would be discussed in next financial report. But when the next financial report really come, it founded more drastic storm.
On UK local market, the numbers of shutting down increased from 30 to 60. On international market, not only the flagship store on Avenue des Champs Elysees and part of the stores in China, but all the 10 stores in China and all the 7 stores in France. Besides, M & S will also close 8 deficit market in Belgium, Estonia, Hungary, Lithuania, The Netherlands, Poland, Romania and Slovakia.
For all the international market, M & S will shutting down 53 stores, and reduce 2100 employees at the same time.
The CEO of M & S Steve Rowe said directly:Shutting down and reduce employees are difficult decision, but its a critical sacrifice for M & S to have a more condense and more channel future
After all, M & S is indeed having a tough time now.
Up until 30th September 2016, M & S get the total revenue 4.9935 billion Pounds, compared with the same time last year, only increased 0.9%, bu on the profit before tax, which dropped 18.5% to 0.2313 billion pounds, based on 0.284 billion pounds the same time last year.
Theres analyst once point out clearly: It expected that M & Ss profit will dropped 12% until March 2017, and the depression garment business can not revive before the year of 2020.
 
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Theres sign before.
 
But on Chinese market, everything have a sign before.
Although M & S always saying China is the very important international market, but its more like the importance of Chinese market to Global market, but not based on M & Ss performance on Chinese market.
On the contrary, we didnt see the importance from the performance of M & S on Chinese market.
M & S entered Chinese market on year of 2008, compare to other department store like Parkson who come to China very early, M & S late for 14 years, it lost advantage at the very beginning.
In the initial assumption, M & S set the base on Shanghai, then open stores in the second-level city around Shanghai, to expect to establish advantage in Yangzi river delta region which take Shanghai as the center.
But M & Ss assumption didnt come true. In the last year, M & S shutting down 5 stores in Shanghai and other cities around, and open new store at Beijing means the first strategy fail.
Then, M & S start the revised strategy to abandon second-level city, and turn to first-level city, they aimed more important city like Beijing, Guangzhou.
M & S announced with confidence, Were proud of the business running in China, we believe its the right action we took. But in the eyes of expert, the first-level city is the same word as high cost, high saturation and high risk.
The consumer from first-level city indeed more identify with the way of quality of life, for example the exquisite fashion service and high quality food, but theres also many strong competitors in the first-level city, especially under the background of high cost of physical stores, E-retailer squeeze the living space of physical stores, M & S still in high risk. If M & S dont change the business strategy and market positioning, they still cant get a firm foothold in first-level city like Beijing and Guangzhou.
Now we see, it comes true.
For M & S, the problem is not depend on first-level or second-level, but reform its own business mode, for example the design of the garment, the speed of supply chain, if the style can meet the taste of the beauty and the fashion, if they need some promotion because of the lack of popularity in China.  The M & Ss problem is from itself.
Actually, many foreign capital department store like Macys and Lotte are enjoying double 11 festival this year. It is not saying these actions are definitely right, can get profit for sure, but its stand for think and change positively.
In the same winter, someone can survive, someone will dead, the difference is the body constitution of each person and if they have right strategy to keep warm. And M & S who dont have advantage on both, is difficult to avoid the failure.

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