Home Depot leaves Beijing

Home Depot, the largest US home improvement retailer by sales, has closed its last store in Beijing, highlighting the difficulties that some western companies face when trying to transplant foreign business models into China. Home Depot, which has closed five stores on the mainland in the past two years, is struggling to find the right business format for one of the world’s most difficult home improvement markets, local analysts said.

“Nobody wants DIY [in China],” said Matthew Crabbe of Access Asia, a Shanghai-based retail consultancy. The do-it-yourself culture that sustains Home Depot in the US, where the retailer has about 1,700 stores, is absent in China, where low wages, an abundance of migrant worker labourers and other cultural, social and economic factors suppress demand for the kind of home improvement retailing common in the US or Europe, according to analysts. “In China, even the more price-sensitive people hire labourers,” said James Roy of China Market Research in Shanghai.

DIY retailers face tough competition from China’s vast “home decoration malls”, which combine many different brands offering sales and service under one roof, in an area often in the hundreds of thousands of square metres, several times the size of a Home Depot store, said Mr Roy.

Home Depot said in a statement that it “remains committed to China” and retains seven stores elsewhere in the country. The company’s Beijing West Fourth Ring Road store, which was shut last week, was closed after “commercial and financial evaluations,” the company said. Sources close to the company said it was rethinking its business model in China. Home Depot acquired 10 stores in China in 2006, under Bob Nardelli, its former chief executive. Its current leadership has focused more on improving the performance of its US stores than on further international expansion.

B&Q, Europe’s largest home improvement chain, has had similar problems in China. A B&Q China spokesman was not available for comment, but as many as a third of B&Q’s mainland stores have recently closed

Source : Patti Waldmeir - FT.com