HD in China: Fewer cities, tighter focus

Home Depot’s collection of Chinese stores has dwindled to seven, with the closing of a store in Beijing in January — the fifth closing in a little more than two years. 

The moves reflect the retailer’s strategy to adjust its focus on key markets, rather than scatter its attention around the country. The Atlanta-based retail giant operates seven stores in three Chinese cities — four in Tianjin, two in Xi’an and a smaller, 50,000-sq.-ft. format pilot store in Zheng Zhou.

“After four years of experience and learning, our plan in China is to focus on the high growth cities,” said Ron DeFeo, a spokesman for The Home Depot, referring especially to Tianjin and Xi’an. “This is where we intend to concentrate our focus, establish a presence and gain scale and momentum.” 

Tianjin alone has 12 million people, and Xi’an isn’t far behind, with about 8 million. The growing population of both cities represents a sales opportunity for the retailer. But cultural differences — for instance, the resistance to western-style do-it-yourself habits — present challenges to expansion.

In addition to Beijing, the company has closed stores in Xi Si Huan, Fengzhongsi, Dong Li, Qingdao and Shenyang.

Home Depot continues to appear content to take its time in China. In the company’s annual investors and analyst meeting on Dec. 13, 2010, CEO Frank Blake described the company’s Chinese retail business as a journey.

“I don’t think we’re alone in having it take some time to figure out how to build a profitable business model,” Blake said. “We’ve said from the start that we’re not there to drive square-footage growth. We’re there to figure out a profitable business model and then move.”

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