Marks & Spencer thinks small as it gears up for Australian debut

Simon Evans
January 28, 2014
The Age
The $13 billion British department store retailer Marks & Spencer is accelerating plans to enter the crowded Australian market.
Marks & Spencer has just appointed two new directors to a corporate entity known as Marks & Spencer (Australia) Pty Ltd which has previously been dormant for almost seven years, and is on the hunt for retail space in Sydney.
The move into Australia is in line with Marks & Spencer’s chief executive officer Marc Bolland’s strategy of transforming the company from a traditional British high street retailer into an international multi-channel retailer.
It will put further pressure on Myer and David Jones, which also face the imminent arrival of fast fashion chains including H&M from Sweden and Japan’s Uniqlo.
But Marks & Spencer won’t be tackling Myer and David Jones head-on, instead aiming to set up small format stores that are around one-fifth the size of a large department store operated by David Jones and Myer.
The timing of the UK giant’s arrival will depend on it securing good sites, with Sydney seen as a likely first target.
Marks & Spencer has 766 stores in the UK and operates 418 stores in countries across Europe and Asia.
It has 16 outlets in Hong Kong and 10 in Singapore and has been eyeing the Australian market for some time.
Marks & Spencer successfully operates a small format retail model in Singapore and Hong Kong where a range of fashion, beauty and gourmet foods form the centrepiece of its offering.
There is speculation that Marks & Spencer will use the small format as its entry into Australia, with the return on investment much better than if it chose to have a more extensive range of items mirroring Myer and David Jones.
The small format stores are likely to be around 2,000 square metres, compared with 10,000 square metres for a full-line department store. Fashion and beauty take up around 80 per cent of the floor space in a small format Marks & Spencer, with food the remaining 20 per cent.
Having stand-alone stores provides a stronger brand presence, which M&S can leverage in its multi-channel approach.
Offshore arrivals
Nora Farren, director of research at Colliers, said offshore retailers were attracted to the Australian retail sector because the local economy was strong relative to many other countries around the world.
Australians were still showing a propensity to spend in the retail sector and consumers were generally enthusiastic about new offerings.
“The issue for them will be finding sites,’’ Ms Farren said.
She believed Marks & Spencer would perform solidly in the Australian market, with online sales across the retail sector still relatively low compared with bricks and mortar retailers.
“Australians like to spend and they like new things and I can see them doing quite well,’’ she said.
Rio Tinto chairman Jan du Plessis is a director of Marks & Spencer Group. Under Mr Bolland’s leadership, the company has earmarked international growth as one of the core planks of its strategy, using a “clicks and bricks’’ approach.
The latest figures from National Australia Bank’s online retail index show that Australians spent around $14.6 billion online in the year ended November 30, 2013 and this equated to about 6.4 per cent of the total spending by shoppers with traditional bricks and mortar retailers.
In December Marks & Spencer notified the corporate regulator it had appointed two directors to the entity known as Marks & Spencer (Australia) Pty Ltd.
They are Anthony Clarke, who is an assistant company secretary of the Marks & Spencer Group parent company in Britain, and Melissa Lovell, a corporate lawyer at oil and gas company, Santos.
Ms Lovell previously worked at the UK law firm Linklaters.
Marks & Spencer (Australia) Pty Ltd has also just notified the corporate regulator that its new registered office is now at law firm Minter Ellison’s Sydney premises, and this became effective on January 21 this year.
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