When foreign businesses such as Home Depot or Wal-Mart open for business in China, knowing the market and consumer is a good idea.
Most Chinese consumers have a different perspective than most Western shoppers when it comes to spending money. The average Chinese consumer born before 1980 prefers to pay cash and buy the best quality for the lowest price.
There’s also a difference in spending habits between younger Chinese born after 1980. Evidence suggests that younger Chinese have caught the credit card virus and are running up debt similar to the average American consumer.
Bob Schmitz writing for NPR’s Marketplace on Friday, April 8, 2011 says, “Home Depot not a hit in China.”
Schmitz talks to Raymond Chou, the CEO of Home Depot operations in China. When asked about closing five stores, Chou indicated this is not a sign of failure and said, “(Home Depot) has closed stores to focus on China’s lesser-known cities where much of the country’s real estate development is booming.”
One criticism Schmitz writes of is the fact that many of Home Depot’s products are made in China and may be bought for less from Chinese merchants.
However, one Chinese contractor says he shops at Home Depot because “It’s easy to exchange and return goods… and (he) knows the materials (at Home Depot) are safe and not fake.”
Wal-Mart critics may rejoice. According to NPR, Wal-Mart’s goals in China are to purchase a chain of retail stores there.
If this scheme will succeed remains to be seen. Wal-Mart has faced slowing business in the United States, is struggling in Japan and failed in Germany and South Korea.
Wal-Mart’s biggest challenge is to overcome its habit of fighting unions and paying low wages, which forces many workers to rely on local welfare and public-health programs. This isn’t welcome in some markets and is the reason why Wal-Mart left Germany.
For the same reasons, Wal-Mart, which is allergic to unions and paying workers a living wage, is facing a Chinese government that is strengthening worker protections and rights to organize/join labor unions.
Last summer, Wal-Mart was forced to allow its Chinese workers to join a union for the first time.
To understand the Walton family, Bizmarts.com reported, “As Sam Walton explained in his 1992 autobiography, Made in America, he didn’t believe in giving ‘any undeserving stranger a free ride’. Nor did he believe in being generous with company profits.”
Forbes reported that the Walton family was worth about 90 billion dollars or 18 billion each.
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