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| Image from MSNBC News |
Homed Depot had
announced that it will close all remaining 7 big box stores in China and will cut 850 jobs. The company will continue to retain two recently opened specialty stores, a paint and flooring store and a home decorations shop in Tianjin. It will also continue to employ 170 store associates. The company says that it will focus more in Chinese market to online shopping.
What happened?
Sometime in December 2006, Home Depot entered China and acquired a local 12-store home improvement retail chain, the Home Way. At that time, the Chinese economy was great and business opportunity was seemed endless.
In recent years, China's economy has slowing down. Retailers are facing pressure in China, where the slowest growth in three years. Retail sales growth in August rose just more than 13% from a year earlier, slower than a 17% climb in August last year. Well, that is an excusable reason. I think that every business, both local and abroad is experiencing some tough economic challenges.
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| Image from PRNewswire.com |
One more reason is that China is a "do-it-for-me" market and not a "do-it-yourself." Home Depot's approach to home improvement is the Do-it-Yourself concept. It works well in the US, but not necessarily overseas. This is one of the main struggles of Home Depot prior to acquiring the Home Way in 2006 and even more evident after the first 4 years of its operation.
With China's thriving cheap labor, why would I do it, if I can pay others for me? Most Chinese prefer apartment-based living which leaves a scarce demand for products such as lumber, and other building materials. I think that Home Depot has failed to translate the "do-it-yourself" ethos in a totally foreign culture.
Sometimes, when you take a business concept abroad, it just doesn't match up with local culture.
Now that Home Depot has created a void in home improvement market niche in China, I am sure another business will fill the gap:
Why IKEA Took China By Storm, While Home Depot Failed Miserably
