Home Depot has learned the hard way about Chinese take out. And the mistakes it made in this foreign market will cost its investors millions, and leave hundreds of its employees without a job.
The giant U.S. retailer announced in mid-September that it was closing 7 big box stores in China, effectively taking out all of its original 12 stores in this country.
The Wall Street Journal was polite when it said the home improvement chain “failed to grasp the local culture,” and was pushing a “alien business model” on the Chinese consumer.
Home Depot’s move cost 850 workers their jobs, and the company had to take a $160 million after-tax charge, including terminating its store leases and other assets. This represents a major corporate failure, and an embarrassing retreat from what Home Depot thought would become a major international market. Thus ends Home Depot’s six year adventure in China.
“Closing stores is always a difficult decision,” said Frank Blake, the chairman & CEO of Home Depot, in a prepared corporate press release. “We are thankful for the dedicated service of our store associates in China, and we wish them all the best during this transition.” To make this move not look like a corporate rout, Home Depot said it would keep open two specialty stores — a paint and flooring store and a Home Decorators Collection store — both located in Tianjin.
“We’ve learned a great deal over the last six years in China,” Blake said. But another company spokesman told the Wall Street Journal, “The market trend says this is more of a Do It For Me culture.” Analysts said that because labor is cheap in China, locals can hire people to do work around their home — and many Chinese residents do not own homes anyway — they are apartment dwellers. So Home Depot was in the wrong place, at the wrong time, with the wrong product.
The Home Depot has other retail operations outside of the United States, in Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. But its foray into China has been an obvious disaster.
In a related move, Wal-Mart, which has 376 stores in China, told analysts in August that it was scaling back its Chinese growth plans too. The Bentonville, Arkansas based retailer said it would “moderate” its plans by cutting in half the amount of new square footage it will add in China.
Readers are urged to send an email to Home Depot’s investor relations office at:
investor_relations@homedepot.com
with the following message:
“Dear Investor Relations,
So glad to hear that Home Depot has finally shut down the remaining big box stores you had in China. This was a terrible investment to begin with — and your company assumed that consumers in China would flock to your stores, without any real understanding of the Chinese consumer’s mentality. This is a very costly mistake — for the company, and for its investors.
Maybe Home Depot should spend more time thinking about how it could improve the job situation in America, rather than chasing illusory profits in China. As it is, most of your ‘growth’ in the U.S. has come from stealing local merchants’ business, and sourcing once-American made tools to Chinese producers.
In so many ways, Home Depot has been a house-wreck for the economy of the United States.”
Home Depot has learned the hard way about Chinese take out. And the mistakes it made in this foreign market will cost its investors millions, and leave hundreds of its employees without a job.
