Marks & Spencer plans to open 44 more stores in India by 2016


November 12, 2013

Zahra Khan, Sapna Agarwal, MINT

Mumbai, November 12, 2013

Marks & Spencer (M&S) on Monday said it expects to have 80 stores in India by 2016, making the country the largest international market by stores outside of the UK.

Marc Bolland, chief executive of London-based Marks and Spencer Group Plc, said India is the retailer’s new “priority market” and a “key sourcing hub”.

“We also want to expand to attractive tier-II cities like Surat and Kanpur, and aim for more than 80 stores by 2016,” he said in an interview, adding, “China used to be the priority international market, but now that has changed.” The company declined to give details of its investments plans.

The company runs its business in India through a 51:49 joint venture with Reliance Retail, owned by Mukesh Ambani’s Reliance Industries Ltd, called Marks & Spencer Reliance India Pvt. Ltd.

M&S said it will continue to work closely with its Indian partner and does not plan to invest directly in the country. India last year allowed 100% foreign direct investment in single-brand retail. “Sometimes, cooperations can be difficult, but this one (Reliance Retail) has been a great partner,” said Bolland.

The company said its India sales were up 28% in the first half of fiscal 2014, with double-digit growth across all stores. Apart from its growing store presence in the country, M&S has given a push to its local sourcing operations as well. Bolland did not disclose the revenue generated by the Indian subsidiary, but said going forward “the financial contribution will be much higher”.

M&S competes with local retailers such as Shoppers Stop Ltd and Dubai-based Landmark Group that runs the Lifestyle chain of stores. It also competes with stand-alone brands Benetton India Pvt. Ltd and Tommy Hilfiger (the latter is present in India through a joint venture with Ahmedabad-based Arvind Ltd). Japan’s Uniqlo and Sweden’s H&M are in the process of opening stores in the country.

M&S has always been aggressive about the Indian market and moved from a franchisee model to the joint venture model in 2008. In 2008, the British department store chain outlined plans to set up at least 50 stores in India by 2013, a target it could not meet, mainly because of an economic slowdown. Currently, M&S has 36 stores in India.

“We don’t focus on quantity, but on quality; we always look for good placing of our stores…and this time our strategy for India is different than it was three years ago,” said Bolland.

Devangshu Dutta, chief executive at Third Eyesight, a retail consulting firm, said M&S started cautiously in India with a franchise model, but moved to the joint venture as it considers India a key market. Over the years, the retailer has increased its India sourcing for domestic and global markets, and has lowered prices and widened the range of offerings to appeal to a larger number of consumers in India, Dutta said. As such, both Reliance and M&S have deep pockets and they can make the commitment to grow, he added.

M&S recently opened a flagship store in suburban Mumbai, a 35,000 sq. ft outlet with over five floors. “We require bigger stores as we have a bigger catalogue, but we will also have more mid-sized stores going forward,” said Bolland.

“We have been cutting pricing, mainly backed by our sourcing capabilities, and have brought it down to mid-market level,” he said, adding, “33% of all M&S’s products sold around the globe are made in South Asia, while 64% of products sold in India are sourced from local suppliers”.

India’s organized apparel market accounts for $8 billion, or 20%, of the overall domestic apparel market, according to Technopak Advisors Pvt. Ltd, a retail consultancy. “Most department retail chains in India are expanding and opening five or more stores per year depending on availability of real estate,” said Abhishek Ranganathan, vice-president (retail, real estate, institutional equity research), PhillipCapital (India) Pvt. Ltd.

Shoppers Stop and Lifestyle are also expanding. Shoppers Stop has over 65 stores and plans to open 8-10 stores a year. Lifestyle, which has 45 stores, plans to open three-four stores this year, Kabir Lumba, managing director of the Landmark Group owned company, had said in a 1 September interview.

The Times of India newspaper, in a report in March, had said M&S planned to launch its food retail business as well in India.

(Sourced from MINT.)