British retailer Marks and Spencer said it plans to soon end its online operations in mainland China, citing the complexity and cost of trading on the country’s “highly promotional” online market, according to the company.
The London-based clothing and food chain, established in 1884, has in recent years expanded its foothold in overseas markets, including mainland China. However, it has been grappling with declining sales in some of its key international markets, closing its brick-and-mortar stores in the mainland in 2016, as well as nine other countries.
The company said in November 2016, when it announced the closures of its mainland retail shops, that it would “continue to trade online” while reviewing its online presence in China.
Nevertheless, only a year after those closures, the company posted an announcement that it plans to close its online Tmall store, citing “a strategic review of our international business”.
“The complexity and cost of trading, together with the highly promotional online Chinese market means continuing to operate our online business in China is unsustainable”, a company spokesperson said.
“We recognise the impact that these plans will have on our colleagues and we will engage with them continuously throughout this process,” the spokesperson said.
The move marks a complete retreat from the mainland China market, as Marks and Spencer will not have any operations in the country following the Tmall shop closure, according to calculations by the South China Morning Post.
But the retailer will continue to operate and expand in markets including Hong Kong and Macau in partnership with Al-Futtaim, a Dubai conglomerate.
Al-Futtain bought Marks and Spencer’s Hong Kong and Macau operations in early January.
“Al-Futtaim is the ideal partner for us to develop and grow our business in Hong Kong and Macau,” said Paul Friston, Marks and Spencer’s international director.
Pascal Martin, a partner at OC&C, a management consultancy, and a former Asia director for Marks and Spencer, said the move was “a logical conclusion to the closing of M&S’s China business”.
“The M&S Tmall store, even though it had grown nicely over the years, by itself did not generate enough sales to be sustainable,” he said. “We can imagine that M&S partner Al-Futtaim, who just took over the M&S business in Hong Kong and Macau, must have reviewed the potential of this Tmall business in China as well, and probably declined to take it over as a package with Hong Kong and Macau, for the same reasons.”
Marks and Spencer shares tumbled around 7 per cent on the London Stock Exchange on Thursday, to become the biggest decliner on the FTSE 100. The tumble came after the company announced sales of clothing and home ware dropped by 2.8 per cent in the 13 weeks to December 30, while its better performing food segment also registered a 0.4 per cent drop in sales for the period.