When B&Q opened their first stores in China, they had huge plans for the Middle Kingdom. Those ambitions were symbolised by the unveiling of the largest B&Q store in the world – the Golden Four Season in Beijing. The two-story mega store which occupied 20,000 square meters was going to be company’s flagship store.
And early impressions were good – Chinese customers eager for more choice and bigger range, all at the right price were flocking to the shop there. On Chinese National Day in October 2004, a record 10 million renminbi (£660,000) in earnings were wracked up at the Golden Four Season.
It looked like Chinese customers had caught the DIY bug.
After opening its first stores in 1999, B&Q now had plans for a hundred more by 2010. For they, like retail giants such as Walmart and Tesco, were confident in making strides in China after the country had lifted restrictions on new store openings when it joined the World Trade Organisation in 2005.
But, the good times couldn’t last. And when Europe’s biggest DIY group, Kingfisher, announced it was selling a controlling stake in B&Q China this year, the company had all but admitted failure.
The B&Q brand had struggled to convince the country’s growing middle class to take up home improvement. Despite owning 39 outlets and employing 3,000 people, the London-listed group was finding it difficult to transplant its business model into a country where doing odd jobs around the house is not seen as a leisure activity. Chinese consumers had not embraced DIY, partly because low wages meant there is a plentiful supply of people to do household jobs. Kingfisher had adapted its business model to the “Do it for Me” culture by offering apartment decorating, kitchen and bathroom-fitting services to the owners of new but unfinished apartments.
However, the group saw sales fall sharply after Chinese authorities took action to cool the overheating property market. In a statement to investors:
Kingfisher said it would sell a 70% stake in B&Q China to Beijing-based Wumei Holdings for £140m
The agreement follows Kingfisher’s announcement in March that it was looking for a strategic partner, because it “needed to be much more Chinese in China”.
Despite this, Kingfisher is still keen to keep one foot in the Chinese market. It’s deal with Wumei is similar to the 50/50 partnership the DIY group has in Turkey. And it would appear that it has chosen its partner wisely as Wumei Holdings, which was founded in 1994, is one of China’s largest retail chains, with around 650 supermarkets and 10 department stores all of which operate under a variety of brand names.
So, for the moment, Kingfisher’s decision to scale back in China allows it to concentrate on established markets in western Europe, and to move on from a difficult chapter in the company’s history. What the future may hold for B&Q in the Middle Kingdom is, of course, another matter.