What Went Wrong for Home Depot?

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Home Depot’s big box stores have bombed in China, and lots of analysts and pundits have attributed this failure to the difference in culture — the Chinese simply don’t like do-it-yourself. That’s true, but it’s not the whole story especially when compared to Swedish rival IKEA. When you go to Home Depot, you’re asking for help to solve an existing problem that you have — you want to install a ceiling fan, you want to put new windows in or you want to build a deck. IKEA, on the other hand, teaches the consumer how to decorate their home, and thereby experience Western culture. The project — and the payoff, for that matter – lets Chinese consumers experience that culture.

The Ikea Model

If Home Depot did not understand the Chinese customer,  perhaps it  could take a leaf from IKEA, which also has a do-it-yourself model but where there are  two differences. Firstly it offers customers a low cost assembly service, those customers that want the lowest possible price can do it themselves –  for a little more IKEA can arrange assembly.

Secondly, Ikea provides the new Chinese home owner an education in how to furnish their home in a western style. Given the growth in new home ownership in the last 15 years there are many new consumers looking for stylish, low cost ways to furnish their new homes.

So, how could Home Depot put this into practice? Well, with a customer focused culture their first approach would be to understand the Chinese consumer in a little more detail. This may have uncovered what in hindsight seems obvious and saved them significant time and investment. Often deep customer understanding can only come from launching and operating in a market. Perhaps, the best approach would have  been to test a single store more thoroughly rather than expanding too quickly. They could have started small and built out their strategy and store expansion plan on a much stronger foundation – one that customers wanted.

What the Future Holds

Encouraged by IKEA, Home Depot hasn’t completely given up. It’s keeping a couple specialty stores — one paint and flooring, along with one decor — and a research and development team in China. After all, who can ignore a nation that boosts some 1.6 billion future consumers?

About Author

Social Brand Watch (SBW) is a collection of experts in digital, mobile and social media in China. SBW was created to complement Resonance's China Social Branding Report, a bi-weekly report focusing on modern marketing methods of the world's top brands in China.

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