Marks & Spencer abandons London Gateway

The British clothing and grocery retailer Marks & Spencer has announced it will not build a distribution centre at the London Gateway Port and Logistics development. The announcement was made as part of the company’s annual results yesterday (20/5/2014).

The original plan, announced last year, was to build a 900,000 sq ft logistics centre in the large logistics park within the port complex in order to manage Marks & Spencer’s imports and to support much of the national market. Now the retailer has overthrown this concept, driven it appears by the demands of e-commerce as well as its modest sales growth.

Marks & Spencer is under pressure both from falling profits and the need to adapt its business model to ‘multichannel retailing’. The company has embarked on a heavy restructuring of both its IT infrastructure and physical warehousing, investing in new systems and facilities but the combination of a changing market and comparatively poorer sales has led it to rethink its logistics strategy. Rather it is the new facility at Castle Donington in the English Midlands which will become the main ‘national distribution centre.’ It will be augmented by another location 100 miles further north and possibly other expanded regional distribution centres.

A further issue behind the decision appears to be a wish to control capital spending. The London Gateway facility would have would have cost £200m whilst the new plan is estimated to reduce capital expenditure by £130m.

While Marks & Spencer may not be a global retailer of the size of Tesco or Walmart, it is a sizeable business which illustrates the struggle that many such businesses are having as they try to adapt to the implications of the e-retailing revolution.

For London Gateway, the development is even more serious. Marks & Spencer was the flagship customer for its very large logistics park and a key example of the concept of ‘port-centric’ logistics. That the retailer has walked away from this, apparently influenced not just by cost but also by changing logistics demands must be concerning for the DP World facility. Despite this DP World are presently working on building their own shared-user – or “common user” –facility.