When British retailer Marks and Spencer Group Plc. started looking outside the UK to expand, it saw its biggest opportunity in India, ahead of China. The firm decided it had to go beyond having franchisee stores in India, and inked a £29 million (Rs230 crore) joint venture with Reliance Retail Ltd on 18 April to set up 50 stores in the country over the next five years. Stuart Rose, chief executive of Marks and Spencer (M&S), spoke with Mint about the company’s new venture, opening larger and more contemporary stores in India, increasing sourcing from here, and building on the M&S brand overseas. Edited excerpts:
Marks and Spencer has been in India through franchises for around six years. How did this decision to enter into a venture with Reliance Retail come about?
The company was on a recovery programme till last year. This was centred in the UK, but now that we are nearly done with it, we decided to look for opportunities overseas. For this, we will look to strengthen ties with existing franchisee operations
like the ones we have in Turkey, Greece and central Europe. But the biggest opportunities we see are in India, and then China. So, we decided to go with Reliance, which has a record of entrepreneurship and dynamism. Our team has been at this for 18-24 months.
Right fit: Marks and Spencer CEO Stuart Rose says the combination of M&S styling and Indian manufacturing would be great.
What will running your own stores allow you to do? How will these be different from the existing ones?
We want to focus on having bigger stores and a better presence. I have seen the stores we have currently and they are perfectly acceptable. But they don’t have the full range of what we have to offer. We want the new stores to reflect the fantastic range of M&S in 2008.
Will you look at bringing new categories such as your food and grocery here, and will you open other formats?
Right now we want to do men, women and children wear, as well as home accessories. There will be one format and we want our stores to be around 20,000 sq. ft each.
Are you seeing some slowing in retail sales in the UK because of the slowing in the global economy? Is that also leading retailers like you to look at overseas markets?
We are seeing some slowing in the UK. It is natural to want to give our business some protection at times like this. So, while we expect some slowing in developed markets, there is a prediction that this economy and China will continue to grow for another decade. So, it is doubly important for us to be overseas now. Currently, just 7% of our business comes from overseas against half for Tesco. We want to take this up to 20% in the next five years.
When will your first new set of stores open here?
Well, first we need to get approval. Then our team here will start looking for locations and we hope to open one by the end of the year. We want to open 50 stores here in the next five years.
You have said that you will look towards food and grocery retail. But we are currently in the middle of a debate on whether the coming of large, foreign retailers would hurt India’s small retailers, similar to what led to the formation of the competition commission in the UK. What are your thoughts on this?
It is not my job to comment on what the government should do. But experience has shown that large retailers have brought better price and quality. People want fresh food and good quality clothing at affordable prices, and large retailers are able to offer that.
Will you also look at increasing your sourcing operations from India?
India is an important hub for us. We have had an office here for three-four years and we think there is an attractive opportunity for us here. The combination of M&S styling and Indian manufacturing would be great. Currently, a third of our clothing comes from South Asia, and a third each from East Asia, Turkey and the North African region. India will grow the fastest of these because you have good communication, good infrastructure and English-speaking skills.
You will be opening stores in both China and India this year. Do you look at it as something you have to do, or a grand adventure?
In the ’80s, M&S did not see the strategic opportunity in expanding abroad. I think we made a mistake when we acquired brands such as Brooks Brothers (US retailer of men’s clothes). People understand the M&S brand internationally and I want to build on that. We had a slightly false start here, too. Now we want to concentrate on building the M&S brand here. In small countries, we want to have franchisees, and in larger ones, we want our own stores.
We are not here for one year or three years. We are here forever and we will take whatever action we need to.