Beijing, China, September 25, 2006--The Chinese delegation had traveled halfway around the world to visit the U.S. stores of American giant Home Depot, but it was hardly love at first sight, according to USA Today.
The newspaper reported that the warehouse-style buildings the Chinese saw in New York, Washington, San Francisco and Los Angeles were too simple. "They were not as attractive as our stores," says Lu Wenwei, an executive at Orient Home, China's top home improvement company.
But Home Depot got one thing right. "Their sales were much better than ours," Lu recalls.
His delegation, touring the USA in 2003, visited Home Depot stores and pocketed everything that was free. Lu's 10-man team flew home "with two or three suitcases each, stuffed with leaflets, promotional materials and all the books we could find," says Lu, director of the president's office in Beijing.
Back in China, they sifted the material. "We basically copied Home Depot's methods," Lu acknowledges, citing the uniforms, welcome badges, advertising fliers, management software and free returns policy. "But it's not an intellectual property problem," Lu insists. "What we studied was all on the surface."
Then Orient Home, with 22 outlets nationwide, set about tailoring the lessons it learned to the tastes of China's fast-growing but inexperienced middle classes.
"Chinese decorate a home only once or twice in their lives, and they don't understand the DIY concept," says Cong Liang, vice president of the Shanghai-listed Orient Group, which owns Orient Home. "Americans know what they want to buy, so they focus on product variety. But in China, we have to do much more product displays and explanations."
Cong says his stores are designed to create a "comfortable environment" for first-time home buyers, with close attention paid to displays, lighting and music. From furniture outlets on upper floors to design and decoration services, Orient Home offers a complete one-stop shop.
"This is 'China's Home Depot,' " says a beaming Huang Qilin, manager of Orient Home's flagship Beijing superstore, a three-story palace of homemaking dreams in the southwest suburbs. No mess is tolerated here, where the aisles gleam with the faucets and tiles shoppers need to make over their homes.
They're getting the sales right, too. "We were counting the cash till dawn," says Huang of the 24-hour promotion his store held May 1, the start of China's week-long Labor Day holiday. The store recorded $1.8 million in sales that day.
Chinese shoppers "have now accepted the superstore style," says Cong. "Our home improvement sales last year were $440 million, double those of 2004." He credits China's growing wealth and real estate boom.
Sales growth that rapid has attracted attention from abroad. British giant B&Q discussed cooperation with Orient Home before going it alone and building its own China business of 50 stores. Now, Home Depot, the firm that inspired Orient Home's business, is eyeing the Chinese market.
The Atlanta—based firm has used China as a source for products such as lighting fixtures, fans, flooring, bath accessories, faucets, hardware and tools for 10 years, says Chuck Elias, the vice president of operations, Asia, who spearheads Home Depot's entry into China.
Home Depot established sourcing offices in Shanghai and Shenzhen in 2002, followed by a business development office in 2004. The company now employs around 100 "associates," according to Elias, but has yet to open a store in the world's most populous country.
Speculation is rife about Home Depot's next move. The Chinese press has reported plans by Home Depot to purchase 49% of Orient Home. In an e-mail interview, Elias would comment only that Home Depot "is aggressively pursuing multiple options in this very important market."
