Too high for somevia WikipediaRetailer B&Q is closing (added correction: part of) its doors in China, after having been unable to make money on the housing decorations market, despite a building boom in many of China's cities. Paul French of Access Asia sees here another proof of his drive against overrating the value of China's middle class at the detriment of ignorant retailers.
But what can have driven them to the wall in a market where the boosters keep telling us that millions of people are buying houses and the middle class is sprouting like mushrooms, and that we should forget politics as it's all about shopping in China and that consumption will soon be driving the economy? Welcome back on stage our old friend, who's name can never be mentioned in the sales pitch of a management consultancy, Mr Rotten Margins, the unwanted guest at every retail party in China. In fact, he never really went away, he just lingers in the background.We know some people who might disagree though.
Update: B&Q does not close fully. This is what Access Asia wrote in addition:
The result is a reported 5 stores to close (which alone racked up �5 million of losses last year) and another 3 to downsize (out of a total of 64 stores in China). Meanwhile, back at HQ, some management will be culled, while a new head of the slimmed-down B&Q Asia is to come in, as well as new commercial directors for B&Q China and a new format development.Apologies if I created here a misunderstanding.
4 comments:
I always wondered what B&Q were doing in China. DIY is an obsession for many house owners in Britain where labour is expensive and self-sufficiency the ethos. But why would you do it yourself in China when there are armies of cheap craftsmen sitting on street corners willing to do the work for you? (And where Little Emperors have no interest in getting their hands dirty fixing taps and curtains)?
As often, Fons appears to have misread what we said. B&Q's woes are nothing to do with the middle class but reveal common operational and regulatory problems for retailers in China - these problems are not caused by the middle, working, lumpen or any other class you care to name.
The problems are - as outlined in the piece:
- poor margins on high volume items adversely affecting profit margins (the middle class don't ultimately set prices);
- intense competition 'against the plethora of independent warehouse style stores that are just based in one city or province.' (the middle class don't control these stores)
- the new supplier-retailer agreement laws that have hit B&Q's ability to discount. (laws sent down from on high not decided at middle class dinner tables)
So, to reiterate - it's not the middle class (be they legion or sparse) but the regulatory and operational environment pertaining at present.
Very poor "journalism". Corrections have been made, but the original story was "B&Q Closing Its Doors". Even after corrections, the piece is still written in the past tense.
OK, B&Q is facing challenges in China -- that isn't newsworthy. They are closing less than 8 percent of their stores and restructuring another 3 percent. From that, Fons writes the company's obituary.
Why, I wonder, does Fons love to revel in others' misfortunes?
China Rhyming is on track. There is a nice and large B&Q in Shenzhen, just round the corner is Roman Joy. They have some similar items (based on shop in shop) and are dead cheap.
You go to B&Q and check everything, then go to Roman Joy and buy there.
They have the cheap crap too. Quality is still harder to sell in China.
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