Posted: January 1, 2012 |  AUTHOR: KEN FOX | CONTACT ME

 

Consumer shopping behavior can often take on a new meaning in China. Some large retailers such as Wal-Mart found out Chinese consumers like to buy their fresh (e.g. alive when bought) at Chinese food markets. However, non grocery retailers confront new challenges as they enter the Chinese market.

A fun and interesting success story in China is IKEA from Sweden. Chinese consumers love these stores but not for the obvious or expected reasons. Often, and especially after new store opening, Chinese shoppers visit these stores with their families on a weekend afternoon for adventure and fun, not necessarily to buy. Reports from various publications site Chinese consumers who visit an IKEA store to sleep and rest on comfortable chairs, beds and couches. Others visit IKEA to take measurements of some furniture to have a local carpenter replicate the design and styles. Others will come to IKEA to take pictures in beautiful settings they are not used to in China.

Families enjoy eating (cheaply) at the IKEA snack bar or cafeteria, and keeping kids busy and offering the familiar Chinese fare along with Swedish Meatballs. Others come for the air conditioning to escape t6he heat and smog of hot summer days. One shopper stated “it’s the only big store in Beijing where a security guard doesn’t stop you from taking pictures.” The Chinese shoppers, especially, the younger generation and newly marrieds want to learn about western home furnishing ideas and styles. Unlike the U.S. and Europe, their parents often did not own their homes and their living environments were often sparse. The younger Chinese want to be modern and try new things, as their incomes in major cities are rising.

Impatient IKEA management has decided to let Chinese consumers sleep, sit, take photographs and otherwise visit and experiment in their stores. They hope, over time, this positive experience will translate to purchasing. Apparently, many Chinese only looked and touched merchandise when Wal-Mart and French hypermarket owner Carrefour first opened in China. Now these stores see repeat customers buying. IKEA currently has nine stores in China, with plans “to open about three stores annually in the coming years,” says CEO Mikael Ohlsson.

In contrast, Home Depot has been struggling in China. It closed five stores since entering the market in 2006. It now operates a total of seven stores in China. Home Depot management realized the “do it yourself” culture often does not exist in China. Home Depot needed to better understand the market before opening in China. Home ownership was non existent 15 years ago. It was then often common for a family or sometimes three generations to share a 300 square foot room for sleeping, eating and all daily activities. People commonly cooked outside their residence. Home ownership has increased since these times, but people do not know how to furnish or decorate a home (or apartment). Home Depot plans to double the number of stores to about 15 by 2015. Like IKEA, Home Depot cannot ignore the growing Chinese population, rising middle class, and aspiring working families.

Best Buy closed all eleven of their Chinese stores during the first quarter 2011. Best Buy tried to use their U.S. model of offering multiple electronic brands with non-commissioned sales people. These Chinese Best Buy stores offered the same friendly and knowledgeable help in brightly lit and wide aisled stores as in the U.S. The Chinese shoppers had been used to shopping in electronic retailers like Gome and Suming, whose low priced stores were often noisy, crowded, cluttered, sometimes dirty, and had another model for buying electronics. These stores had multiple kiosks, each representing an electronics brand (i.e., Samsung, Lenovo, Toshiba, Acer, etc.) each manned by an employee of that company. Buyers had to buy from a manufacturer owned kiosk and salesman. The Best Buy stores were opened in the big Chinese cities but did not succeed in competing against the traditional electronic retailers. Luckily for Best Buy, they had acquired a smaller but traditional Chinese electronic store retail chain (called Jiangsu Five Star Appliance) with the familiar multi-kiosk/manufacturer format. Chinese shoppers resisted the Best Buy model and what they perceived were higher prices.

Any global retailer entering China has to conduct research and study this unique market. Leveraging local expertise is key, but patience and perseverance can help win the day.

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©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

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