Selling ‘Britishness’ May Not Be Enough for House of Fraser in China

on March 16 2015 | in Retail | by | with No Comments

House of Fraser

As House of Fraser readies itself to enter the flat-lining department store market it China, it would be wise to learn from its fellow British companies Marks & Spencer, Tesco, and Kingfisher.

The British department store chain, which was acquired by Chinese conglomerate Sanpower last year, has plans to open three department stores next year in second-tier Chinese cities, according to Financial Times.

House of Fraser’s opening of department stores in China comes at a time when the preference of Chinese consumers is shifting away from department stores.

Furthermore, the company will enter a market with a glut of shopping options. Shopping centers in China now number 850, and 165 new shopping malls opened in 2014 alone.

The mistakes of other British brands, Marks & Spencer, Tesco, and Kingfisher, can serve as an example to House of Fraser. M&S recently closed five stores in and around Shanghai and has announced that it will revamp its China strategy. Similarly, Tesco’s partner in the country, China Resources, has released profit warnings due to the costs of integration between the two companies.

Though many other international retail chains, including Home Depot, Best Buy, and Germany’s Media Market, have had limited success in China, the British brands were banking on China’s love of Britishness, but that is not enough to win over the Chinese market.

Retail analyst Yan Qiang at Adfaith Consulting in Beijing believes the issue for these foreign retailers is that they do not take the time to truly learn about the Chinese consumer.

“They were too proud of the good quality of their products and assumed that as long as the products were good, Chinese consumers would buy them,” he said. “But a man will not marry just any pretty girl, he will only choose the one who really suits him. They failed to win the hearts of the Chinese and now they’ve missed their moment as the Chinese economy is not doing well enough to support rapid consumption growth.”

All three of House of Fraser’s fellow British retailers made similar mistakes in not learning enough about the Chinese market and the preferences of Chinese consumers.

Marks & Spencer entered China in 2008. Immediately, the brand faced issues of not having enough small sizes stocked in its Shanghai flagship. Since 2008, the retailer has also learned that China is a large and diverse country. With temperatures between Chinese cities varying by up to 20 degrees, M&S learned that it would have to adjust the inventory at its different locations to stock more temperature-appropriate clothing.

M&S has listened to the needs of its customers and expanded its baby and children’s lines over safety fears over Chinese products. Additionally, it has begun importing quality foods and wines, including French Merlot, to cater to the tastes of the rising Chinese middle-class.

The retailer has also moved away from a strategy of clustering its stores in and around Shanghai. Since partnering with JD.com and Alibaba’s Tmall, M&S has used the sales information gained through those platforms to shape its China strategy. The brand now has plans to open flagship stores in both Beijing and Guangzhou.

“We probably would not be entering Guangzhou and Beijing if we didn’t have any orders coming from these two regions on Tmall,” said M&S international director Patrick Bousquet-Chavanne.

British grocer Tesco had also tried to heed its customers wishes and remake itself to fit the Chinese market, but it was too little too late, as the company couldn’t contend with the vast geographical distances and differing local grocery preferences. Chinese consumers are used to the traditional street market, so Tesco brought in live seafood tanks and tried to recreate the street market atmosphere. The company also built hypermarkets and “Lifespace” malls featuring the grocer’s stores to no avail. Tesco eventually scaled back its plans in China before signing the deal with China Resources.

The final cautionary tale for Marks & Spencer is Kingfisher, the British do-it-yourself retail chain. In a sign of hubris, the company entered the Chinese market due to the lure of China’s rising middle-class and their increasing disposable incomes, but there was one very large problem. The idea of do-it-yourself, or self-home repair, doesn’t exist in China. Not only were Chinese consumers worried about the toxicity of the paint fumes, but labor in China is so cheap that middle-class homeowners can pay someone to do the work rather than doing it themselves.

“The sheer vastness of the country means that there are so many customer types, in so many different regions and cities,” said one British retailer with experience in China.

image credit: alwyn ladell

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