China Daily reported on the current woes of “big box” B&Q and why Home Depot China is doing poorly—again, not here but in China. While much of the troubles you might expect as a byproduct of the current economic environment, one thing was not so obvious – culture. Home Depot (well known here in the states) has only been in operation in China for about 2 years. B&Q, a similar style store based out of England has been in operation for about 9 years. B&Q is closing a third of its stores (22 out of 63) and reducing the size of 17 more. Home Depot currently only has 12 stores (servicing 1.3 billion people – imagine the lines).
Why Home Depot China is Doing Poorly
Two years ago, a study showed that the majority of the home improvement sales – some 97.5% – were not handled by the top four retailers (including B&Q). In a country with a $7.1 billion home improvement market, that’s a lot of missed sales. But why? Apparently, women make many of the home decorating and improvement decisions in China and the big box Home Depot and B&Q are still geared towards men – just like they are here in the west. Apparently they are making efforts to make their stores more female friendly (just like they are here) but so far it hasn’t had much effect.
On top of that, the name brands just aren’t resonating with the Chinese. While Westerners might feel like they are getting a better product from a big box store or at least a deal, there is a lot of competition in China. Small stores, set up on the outskirts of cities, often sell competing products. These seem to be where the bulk of the Chinese currency is ending up.
One of the reasons so much of the production is outsourced to China is because of the cheap labor. It only makes sense that “DIY” is not exactly commonplace there. It is far more common to get a contractor to do the work for you. While Home Depot and B&Q are used as resources to make sure their contractor isn’t inflating the prices of materials, that seems to be where the usefulness ends for the big box stores.
What’s Next for Home Depot China
While B&Q are reorganizing and re-targeting their stores toward women, Home Depot has a different tact – get profitable or get out. While the number of consumers and the possible dollars may be a treat too tantalizing to pass up, as long as these western retailers continue to provide similar services and ignore the wants, needs, and expectations of the indigenous people, they will likely continue to struggle. At it’s hight, B&Q only possessed 1% of the total home improvement dollars (yuan) in China. That’s not exactly a success by anyone’s measure.
