The Reasons Behind Home Depot’s Multimillion-Dollar Failure in China and What It Revealed About Globalism
Home Depot is a staple here in America. With its bright orange exterior and catchy slogan, “Home-doers get more done,” people know that, if something is broken or needs remodeling, this is the store to go to for supplies and some friendly help. This success is reflected in both the sales and size of the franchise, with over 2,200 stores in three countries and a net earning for 2020 of $110 billion (“Home Depot Revenue 2006–2021: HD”). So, with these booming sales in America, it looked like Home Depot would have been able to easily replicate their vast marketability and global presence in other countries. However, when 12 Home Depot stores opened across 6 cities in Asia, they all shockingly failed and were forced to close down after a mere 6 years in business. The huge loss of profitability and missed market opportunity of the Home Depots in Asia reflects the necessity of appealing to different racial groups and understanding their standpoints, especially from a cultural stance. While it revealed a vast amount about today’s market, I think that the most significant takeaway is that, even though globalization is becoming the new normal, these integral cultural traits and viewpoints are what differentiate countries and groups which consequently leads to company expansion issues and decreased universal marketability.
While there were many reasons behind the failure of Home Depots in Asia, in a historical and cultural sense, Home Depot failed to take into account their targeted customer group. Currently, in China, ownership of condo/apartment space is rapidly increasing, and many new, excited homeowners are looking for ways to revamp and furnish their homes. Women are usually in charge of home decoration and styling over their male counterparts and undertake most of the furniture/home goods shopping, controlling this aspect of the market. While this is a more surface-level observation, there are bigger cultural aspects that are deeply rooted in these consumer habits. In China, because of the one-child policy and cultural favoritism towards male children, men outnumber women “120 to 100, with 30 million ‘surplus’ boys” (Cameron, L; et. al). However, marriage is a very important part of the Chinese community and, as a result of this ratio, wives can be difficult to find for many men; so, in couples, husbands tend to give the final judgment to their wives to appease them. Women have more financial control and say in the consumerism world and thus, make many of their household purchases. The favoritism towards female consumerism, especially in this cultural aspect, is fixed in China’s history and current state, something that Home Depot should have anticipated and adjusted for. This displays why Home Depot’s attempt at expansion into different countries failed drastically because China’s cultural traits overrode the globalization of the male-dominated consumerism of home repair products.
Consequently, we can further analyze why Home Depot’s homey, rustic style appealed to an American audience but not to the Chinese population. These stylistic choices did not replicate the more chic and modern Westernized/European style desired by Asian countries, and the bold coloring and do-it-yourself, laborious projects also appealed more to men than women. As a result, this turned away many potential top consumers, specifically on the female side. Especially in China, many women were looking for eye-catching, more toned-down colors and easy, less physically demanding projects that they could work on at home, something that Home Depot failed to provide. By appealing more to a “manly” aesthetic, Home Depot lost a majority of its main consumer group (Tulshyan, R.). This explains why other home recreation stores such as IKEA were a huge hit; they had what the women population wanted: modern and upscale furniture with European sleek designs that could be easily assembled at home. The appeal for these stylistic options is reflected in Helen Wang’s account and experiences in IKEA stores in Shanghai. She describes the store as filled with many displays and products and play areas/restaurants for the customers. It was as “if it were a theme park” for Chinese customers to “experience the Western style of living” (Wang). Because of these attractions, women are naturally drawn into the design and appeal of the coveted Western look and, as a result, this increased sales in IKEAs and helped to boost their exposure to the outside world. While both Home Depot and IKEA focus on a similar facet of home improvement/remodeling, the juxtaposition of the drastic failure and huge success of both these businesses displays the importance of looks and physical appeal to draw customers in.
With this being said, despite the failures in China, there are many reasons why Home Depot succeeded in America. Consumerism, especially in home decoration and renovation is more male-dominated because it is typical for the males to go out to buy the supplies and perform the physical labor of the work which is why Home Depot’s hands-on style appealed to a male audience. Additionally, in America, it usually is very cost-effective to perform at-home or DIY repairs, rather than paying for professional help to do it for you. While it might take time and a little bit of effort and planning, it ends up being cheaper to do these projects by yourself. Home Depot profits greatly from this need for both supplies for projects along with professional guidance from the staff to get started. I think that we can delve even deeper into Home Depot’s success by looking at a more social and cultural stance. In America, many people, regardless of class or profession, view themselves as equals on a class scale. Thus, in the case of Home Depot, both white-collar workers and blue-collar workers are willing to perform their home repairs without any reservations about social standing. Since everyone is ready to “get their hands dirty”, Home Depot did not have to target different groups and, instead, was able to appeal to a wider audience of all different backgrounds. Thus, the secret behind Home Depot’s success in America incorporates multi-faceted properties behind the market in America and the social/cultural context of consumerism which is fixed into their consumerism habits and wants.
However, in China, these embedded cultural ideas of social class and market availability/prices are something that Home Depot failed to take into account. Looking at a market standpoint, whereas in America home labor is cheaper, in Asia, professional labor is very affordable. It is commonly known in China, most labor fees, no matter the extent of work or damage needed to repair, is a flat rate of $1,000. This can be seen in the New York Times article, which goes into how calling a handyman for household fixes is always a good idea because they know how to quickly fix something and in the process, can locate and repair other unknown issues for $1,000. For example, in a case of a faucet leaking, they “might discover the pipe was carrying…years’ of debris and needs to be flushed out. And maybe there’s a blockage somewhere” (Kaysen, R.). Even though this would be extra work and thousands of dollars more for supplies and work, repairmen usually still stick to the same flat rate. Thus, especially in these Asian countries, it would be both cheaper and easier to hire someone to fix an entire household issue rather than to try to gather supplies and figure out how to do it yourself (The Week Staff). Home Depot failed to realize this loss of market need for DIY projects and at-home repairs due to the cheaper and more efficient local alternative of reliable repairment.
While this market value played a significant role in Home Depot’s failure, the reason behind cheap labor lies in a more deep-rooted cultural aspect. In China, there is a very strict divide between the blue-collar laborers from the white-collar higher-class workers, which has been around for decades. For some background information, the middle class or white-collar, “professional” workers in China make up about 30% of the population with monthly salaries ranging from $5K to $500K a month as compared to the 60% of the lower class or blue-collar workers with monthly salaries $300 to $1K a month (Zhang, Y.). Between these classes, there is little to no intermixing, and those higher up heavily look down on lower-class workers. They often refuse to interact with them, some even going as far as refusing to look or touch them as a sign of power and rank. It would be considered shameful and degradation for middle/upper classes to get their hands dirty doing work that was meant for someone of a lower class. Thus Home Depot’s more egalitarian approach to home labor did not translate over to China’s social construct.
Home Depot is a prime example of a company that took one strategic approach at a universal market that failed drastically due to cultural clashes. Since this social standing and cultural weight on higher classes is extremely embedded into the Chinese way of life, the globalization of the home repair market (Home Depot) was not able to translate over to China. I think that this speaks to the idea that, while globalization is becoming the new normal, there are products and economic prospects that can never be truly “universal” because they fail to shift over to integral cultural traditions and ideas. While market wants and preferences might change gradually, these cultural constructs are what govern societies throughout history and are omnipresent forces in today’s society. Thus, with Home Depot, home repairs go past the surface level of the financial ease of hiring someone; it has a great extent to do with a deeper level of cultural understanding of maintaining this social class and one’s pride and privilege. This social hierarchy, an integral part of China’s society, is what separates them from other countries’ consumer habits and is something Home Depot did not anticipate or prepare for in their attempt at global expansion.
While Home Depot is a more small-scale example of these social/consumer interactions, I think that it leads to a deeper analysis of the world’s current market, specifically in globalization. Home Depot is one aspect of an economic enterprise but the juxtaposition of its major success in America and drastic failure in China speaks volumes on how strongly cultural ideas and wants are integral in consumerism. I think that Home Depot failed in this aspect because, although they center around providing supplies for hands-on, laborious projects and having a more rustic vibe, they should have adjusted their marketing strategies and stylistic choices to fit the Chinese population. While the housing market or availability/pricing of home repairs might eventually shift in China, their cultural ideas on favoritism towards female consumers and social constructs will hardly ever change, due to their long-lasting presence. The idea that globalization can translate over into a market world is not always true because these cultural traits override universal marketing strategies due to often contrasting consumer wants. With Home Depot, these cultural differences in America and China did not just lead to one marketing issue; there were many missed observations that damaged Home Depot’s ability to appeal to the Chinese population from wrong targeted consumerism groups to unappealing stylistic choices to cheap manual labor. Therefore, through Home Depot’s failure in China, we can learn a vast amount about both effective marketing strategies and the effects of culture on economic success.
Works Cited
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“Home Depot Revenue 2006–2021: HD.” Macrotrends, www.macrotrends.net/stocks/charts/HD/home-depot/revenue.
Kaysen, R. (2018, July 20). Why do all home Repairs Cost $1,000? Retrieved February 28, 2021, from https://www.nytimes.com/2018/07/20/realestate/why-do-all-home-repairs-cost-1000.html?auth=linked-google
The Week Staff. (2012, September 18). Why home Depot is failing in China: 4 theories. Retrieved February 28, 2021, from https://theweek.com/articles/472271/why-home-depot-failing-china-4-theories
Tulshyan, R. (n.d.). Bizjournals.com. Retrieved February 28, 2021, from https://www.bizjournals.com/atlanta/blog/femme-fortune/2013/04/home-depots-failure-in-china.html
Wang, H. (2011, August 11). Why home Depot struggles and IKEA thrives in China? Retrieved February 28, 2021, fromhttps://www.forbes.com/sites/helenwang/2011/02/10/why-home-depot-struggles-and-ikea-thrives-in-china/?sh=62b7557f18e4
Zhang, Y. (2019, December 01). Understand the 5 social classes of today’s China-knowledge center. Retrieved February 28, 2021, from https://www.digichezf.com/case-study/2019/12/1/understand-the-5-social-classes-of-todays-china
