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Home Depot Inc. moves from big box stores to e‑commerce in China

Home Depot Inc. has just announced a bold new e‑commerce ini­tia­tive, shut­ting down its big box stores in Chi­na in favor of a share in the country’s mas­sive online home improve­ment market.

In a move that will inter­est every aspir­ing e‑commerce man­ag­er and e‑commerce ana­lyst, the com­pa­ny is expand­ing its online pres­ence in the most dense­ly pop­u­lat­ed coun­try on the plan­et, after real­iz­ing that large bricks-and-mor­tar stores weren’t com­pat­i­ble with Chi­nese con­sumers’ needs.

The e‑commerce band­wag­on gath­ers momentum

The move toward e‑commerce by tra­di­tion­al­ly store-based retail­ers is becom­ing some­thing of a trend. Wal-Mart Inc. recent­ly launched a new seman­ti­cal­ly based search engine that has boost­ed its online sales by 10 — 15 per­cent in just three months.  And, to improve the shop­ping expe­ri­ence for its store-based cus­tomers, it’s pilot­ing a new smart­phone app that scans the bar­codes of the goods while shop­ping.  All the con­sumer has to do is pay at the checkout.

Whilst the lat­ter isn’t strict­ly e‑commerce, it does reflect how dig­i­tal tech­nol­o­gy is lead­ing to new ways of eas­ing cus­tomer expe­ri­ence and cap­tur­ing mar­ket share — pre­cise­ly what Home Depot is aim­ing for in China.

Speak­ing to the Reuters Retail and Con­sumer Sum­mit on Fri­day, Home Depot’s Chief Finan­cial Offi­cer, Car­ol Tome, said that unlike home improve­ment mar­kets in the U.S., Cana­da and Mex­i­co, Chi­na sim­ply doesn’t have the same kind of project-ori­ent­ed con­sumer.  Instead, Chi­nese cus­tomers tend to want their “do-it-your­self” projects car­ried about by some­one else.

A pru­dent decision

The online route seems to suit Chi­nese con­sumers more than the big store approach, a dis­cov­ery which has led Home Depot to close down all sev­en of its “big box” Chi­nese big stores.

Tome has clear­ly been pay­ing close atten­tion to con­sumer require­ments in Chi­na since she took oper­a­tional respon­si­bil­i­ty there a year and a half ago.  Announc­ing the firm’s inten­tion to “keep learn­ing”, she can take some com­fort in remarks made by Cred­it Suisse ana­lyst Gary Bal­ter, who deemed the clo­sure of the stores a “pru­dent decision.”

There’s cer­tain­ly pay­dirt to be hit – Bal­ter esti­mates the Chi­nese mar­ket for paint, home fur­nish­ings and fur­ni­ture to be worth around $20 bil­lion.  Fol­low­ing Tome’s announce­ment, Home Depot’s shares rose by 2.3 per­cent on the New York Stock Exchange on Fri­day, reach­ing $59.65.

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