Summary
M&S had a basic error in shop-keeping by failing to understand that the Shanghai customer is not the typical middle class customer of Middle England. Supply Chain problems aside, which are always challenging when importing food products especially into China, the key issue is understanding that Shanghai is a distinct market in China. Having walked the floors of M&S in Shanghai the key problem is the lack of recognizable brands especially in the apparel and home areas. The Shanghai market is characterized by a willingness to spend on luxury products that are clearly demarcated as luxury purchases. The traditional British M&S customer purchases based on the quality of the product. The perception of quality in the UK and other markets has been developed over decades. In the Shanghai market, middle class consumers are willing to save and spend on recognizable luxury brands.
Analysis
The supply chain problems that M&S have encountered, especially in importing food items into China, are not uncommon. Importing foods is often a long and protracted process because of the caution the government has and its stringent requirements on labeling, testing and duties. When importing products into China, give yourself plenty of lead time as more often than not there will be something that occurs which will lead to a delay. Going in with the attitude that what works in Hong Kong or Taiwan will also work in China will lead to a lack of appropriate research of what the process really is for importing products and retailing them and the result will be delays for product launch.
For retailers entering the Chinese market recognizing what customers want, rather than what they should want, is vital to setting up a viable strategy for customers. Retailers such as Parkson, the Malaysian group, has arguably been able to understand the differing needs of Chinese customers in each of the distinct markets that they operate in. Their strategy of operating concessions within stores that cater to different international and domestic brands has seen them increase net profits http://uk.reuters.com/article/rbssConsumerGoodsAndRetailNews/idUKHKF07994320090220. Opening a store with own branded products is dangerous in a market in China unless the retailer is sure that customers aspire to own this product. Walking through the M&S store in Shanghai, what is prominent is the lack of customers on the non-food floors, and the lack of brands that Chinese customers could identity as aspirational, luxury purchases that they would want.
M&S need to recognize that China's middle class and their tastes are not the same as middle class Britain or the other markets they are successful in.
