Marks & Spencer Plans Venture in India, Economic Times Says

High-street's top brand and Britain's marquee retailer, Marks & Spencer (M&S), is planning to set up a a 51:49 joint venture (JV) in the country. The move is part of a larger global business strategy which is betting heavily on China and India for growth. Three-four Indian partners are interested to partner the foods-to-apparel retailer, given that single brand retailers are allowed equity only upto 51%.

Buying into the Indian middle class purchasing power story, the high-street retailer is also planning to sell all kinds of food, confectionery, snacks and home furnishing in India — all under the M&S brand. Till date, it sold only clothes and lingerie through its franchisee partner Planet Retail, majority owned by Mr Sharma, an NRI settled in Indonesia.

These existing outlets may be transferred to the proposed joint venture company subsequent to its formation. Indian consumers have a soft spot for M&S which was for long the most preferred brand bought by those travelling abroad.

In an official statement post results, M&S chief executive Stuart Rose said, “India is an equally exciting long-term opportunity and a market where we have been trading for six years. We are looking to accelerate the pace of growth in this fast developing economy over the next few years.”

A top industry source said the retail industry is India is set for a major churn. In the past, foreign companies have often used the franchisee-model to introduce its brands in India and test consumer preferences. But with the India growth story assuming an almost iconic status, the same brands now want to control the India operations themselves.

Many like LVMH, Christian Dior, Diesel, Dolce & Gabbana, Armani, Versace and hundreds of other brands are either converting their existing licensee arrangement into an equity joint venture or getting into fresh joint ventures. Sensing an opportunity, even real estate companies are getting into this business and forging JVs with foreign brands.

Marks & Spencer (M&S), with an annual turnover of over 8 billion pound sterling (US $16 billion) is an iconic UK-based retail giant with over 400 stores located in the UK and 150 stores worldwide, including over 130 franchise businesses operating in 35 countries. It's the largest clothing retailer in the country, as well as a multi-billion pound food retailer.

Most M&S shops sell both apparel and foods. It also has a third line of business — selling homeware like bed linen — but is far smaller than the other two.

M&S, which was largely focused on the UK market, has been forced to look out of the country for growth owing to tightened consumer spending in the face of rising interest rates, stagnating house prices, and stringent credit checks on card applications.

M&S is planning to set up a fully-owned subsidiary in China. Sluggish sales back home has forced the British retail outlet to announce investments in India and China next year.

The company has over 250 stores overseas which are largely franchised whereas the new strategy will involve setting up company-owned outlets, sources said. The company will price its products a bit above market price but will offer shoppers value for money. Sluggish sales forced the chain to slash its prices recently in India.

M&S has already selected Global Park in Sri Lanka to house its regional logistics hub where currently M&S garments purchased from Sri Lanka, India and Bangladesh are stored for onward distribution to M&S stores in UK, based on their stock levels and sales requirements. The hub is now geared to handle complex multi-country consolidation and will be used by M&S to handle distribution to their international stores, including franchise stores located in Asia and Middle East.