Why Home Depot Struggles and IKEA Thrives in China?

Forbes: Helen H. Wang

At a time when China’s home furnishings market surged 17 percent, the largest U.S. home improvement company Home Depot has been struggling and closed five stores since it entered the China market in 2006.

The Home Depot (9/365) (9/29/08)

Image by detbuzzsaw via Flickr

Analysts pointed to the fact that a “do it yourself” culture does not exist in China. True.  Because labor costs are relatively low, many homeowners would rather hire someone to do the work than do it themselves. Apparently, Home Depot made the same mistake as some other companies that entered China without understanding the local market, which is often dramatically different from their home market.

Unlike consumers in the West, Chinese consumers have no role model from older generations. Home ownership was non-existent about fifteen years ago. It was then very common for a family, sometimes three generations, to share a 300-square-feet room that they used for sleeping, eating and daily activities. A kitchen was not even a necessity as many people simply cooked in a common area outside their room. Continue reading