Home Depot changes its strategy in China after failing to achieve its targets

Home Depot is not the first company to find out that the strategy that worked well back home does not work in a foreign country. Wal-Mart failed in Germany not realizing that the competitive landscape was different. Starbucks failed in Australia, closing most of its shops because the Australian consumer was used to much sophisticated coffee. The WSJ journal reports on the changes in the Home Depot China strategy after failing to implement the previous one successfully.

Home Depot Learns Chinese Prefer ‘Do-It-for-Me’
The largest U.S. home-improvement retailer, which entered China in 2006, has struggled to gain traction in a country where cheap labor has stunted the do-it-yourself ethos and apartment-based living leaves scarce demand for products like lumber.
Home Depot conceded that it misread the country’s appetite for do-it-yourself products. “The market trend says this is more of a do-it-for-me culture,” a Home Depot spokeswoman said of China.Home Depot is shaking up its strategy by focusing on specialty stores. Three months ago, it opened one paint-and-flooring store and one home-decorations outlet in the northern port city of Tianjin to cater to specific needs and shopping preferences shown by Chinese consumers, the spokeswoman said. It also plans to launch online operations with a Chinese partner, she said, without naming the company.

Home Depot debuted in China with a 12-store acquisition six years ago and the number has since dwindled as it found that Chinese consumers differ from their global counterparts. As Swedish furniture giant IKEA discovered, Chinese consumers will pay for people to do the work for them. Several years ago, the furniture store added services to help customers assemble their furniture.

Home Depot’s closures will cause the company to take a $160 million after-tax charge in the third quarter, a company statement said. The charge will be equal to about 10 cents per diluted share, and will include the impairment of goodwill and other assets, lease terminations, severance and other charges associated with closing the stores.

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