British retail giant Marks & Spencer intends to bring its environmental initiatives to the region.
The success of Marks & Spencer since its launch in the early 1900s has revolutionised the British retailing industry. As the largest clothing retailer in the UK, the company has raised standards in business innovation, pioneering several different approaches to operational management, from launching market-leading product ranges to increasing brand awareness through fresh marketing campaigns.
More recently, M&S announced a US$400 million ‘eco-plan', which will fundamentally change its supply chain operations, with more products being sourced locally and a reduction in the amount of merchandise being transported by airfreight.
The bold move has caught the attention of the international business community, with other retail heavyweights expected to follow suit in the near future. In addition, as M&S enters its most ambitious expansion programme to date in the Middle East, the decision to make its logistics operations more environmentally friendly will directly impact this region.
The M&S brand is operated in the Middle East through an exclusive franchise agreement with the Al-Futtaim Group, which was signed in the late 1990s. The company marked this occasion by assembling the world's first Arabic signboard for M&S at Dubai's Al-Futtaim Centre in January 1998, which was raised by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, UAE prime minister and ruler of Dubai.
"We have responsibilities for stores in the UAE, Kuwait, Bahrain, Oman and Qatar," explains Nigel Rea, general manager of M&S, UAE.
"The first store opened in Dubai nearly ten years ago. Since then, there's been a steady succession of growth, with nine stores now established in this region, three of which are located in Dubai."
The steady growth of M&S in the Middle East has proved fruitful, with profit levels climbing at impressive levels year-on-year. The brand has quickly established a favourable position with shoppers and the Al-Futtaim Group recently confirmed a strategy to capitalise on this popularity.
"We're embarking upon the most rapid expansion programme since the business was launched in the Middle East. A large number of new stores will be opened over the next two or three years," says Rea.
"For example, a second store will be opened in Qatar next year, together with another store in Kuwait. We're also looking at future openings in Dubai within the next few years, and we're looking to extend into some new territories under licence from M&S in the UK. I think it's reasonable to assume we can reach around 15 or 16 stores in the next three to four years," he adds.
The range of M&S products being offered by the Al-Futtaim Group in the Middle East are representative of the UK market, which primarily consists of ladieswear, menswear, kidswear, lingerie, beauty products, household items and food. "We are quite unique as a franchise operator, because we have opened relatively large stores, whereas other franchise operators tend to operate smaller outlets. So, with the space we have across our portfolio, we can broadly offer customers all the ranges found in M&S in the UK," says Rea.
M&S in the UK has traditionally sourced its products from several locations around the world. These items are then transported directly to international franchisees such as the Al-Futtaim Group. "The majority of products sold in the Middle East are imported from the UK, which we order directly from the parent M&S company. We also have access to a relatively small amount of merchandise being warehoused in Hong Kong," says Rea. "In the longer term, as M&S increases its international business, the parent company is looking to establish more overseas distribution hubs, which will lead to obvious advantages, especially since we source from the UK, even though some products are manufactured closer to the Middle East."
The products are transported from the UK directly to Dubai, using a combination of airfreight and sea freight. "The majority of cargo arrives in Dubai by air, because we're a fashion brand and need to remain relatively quick to the market. In fact, we are Virgin Atlantic's biggest cargo customer on the UK to Dubai route," says Rea.
"We also ship a lot of products by sea, such as food, which is more viable for sea freight transportation, as long as there's no shelf life problems.
"In the future, we are looking to move a greater amount of sea freight, especially for the core flow products, which are not particularly high fashion. Its actually more cost effective to transport them by sea."
At present, about 80% of products are being transported by airfreight and 20% by sea freight. Rea would like this ratio to shift within the next six months to 40% by air and 60% by sea. This strategy is particularly timely considering the parent company M&S recently announced an ‘eco-plan', labelled ‘Plan A' which involves a cut in products being transported by airfreight. Earlier this year, the company started to label food imported to the UK by air. The label, which features a small aeroplane symbol and the words ‘air freighted', will initially appear on over 20 different food products, such as beans, mangetout and strawberries, rising to 150 by the end of the year.
"Plan A is primarily geared towards the UK business. However, we have read the documents, because its important to understand how we can play our part in helping M&S achieve its global environmental plans," says Rea. "Generally speaking, businesses in the Gulf are not very advanced in terms of their focus on some environmental issues, so we need to have real integrity with the core brand in the UK. Clearly, our own ambitions to increase sea-freight activities will make a major contribution. We're also looking at other things, which will help us to play our part on a local level."
The move towards a more environmentally friendly supply chain for the Middle East operations will be managed in partnership with GAC Logistics, which operates the M&S warehouse in Jebel Ali Free Zone.
"GAC Logistics handles a range of warehouse operations for M&S, such as receiving the delivery of stock, processing the cargo and placing everything onto the warehouse racking system. As our logistics partner, the company also manages the specific orders from each store and prepares the items for dispatch. Everything is dispatched by road to each store, on a variable schedule, which is calculated on a weekly basis depending on the volumes being dispatched," says Rea.
The decision to outsource its logistics operations in the Middle East follows an international trend for M&S. The retailer initially conducted its own supply chain management in the UK, but eventually decided to follow an outsourced approach to gain operational advantage.
"The parent company made a fundamental decision to outsource their logistics because it is not necessarily an expert in this field. It wanted to concentrate on the core retail operations instead. Over time, it has now established long-standing relationships with logistics companies throughout the world," says Rea. "Over in the Middle East, it's a similar situation because we don't have the expertise inhouse to run large scale fashion logistics operations," he adds. "So, at the moment, we plan to continue with our current relationship with GAC."