September 14, 2012 / 4:55 PM / 5 years ago

Home Depot steps up e-commerce efforts in China

NEW YORK (Reuters) - Home Depot Inc (HD.N) has already started selling goods on website in China and is looking for opportunities to partner with other e-commerce sites as it tries to maintain a presence in the world’s most populous country even as it abandons its big box stores there.

The world’s largest home improvement chain realized that its large store model was not right for the Chinese market, Chief Financial Officer Carol Tome told the Reuters Retail and Consumer Summit on Friday.

“We realized we had a model that wasn’t meeting the needs of the Chinese consumer,” she said.

China does not have the type of project-oriented customer that Home Depot has found in other markets such as the United States, Mexico or Canada.

Adapting Home Depot, a retailer focused on being a destination for do-it-yourselfers, to a market such as China where consumers want the remodeling and repair projects to be done for them has been challenging.

The company made its first foray into the rapidly growing Chinese market in late 2006 through its acquisition of a 12-store Chinese chain called The Home Way.

It has struggled to expand since then as it was a relatively late entrant into the market, behind other international chains such as Britain’s Kingfisher Plc (KGF.L), which ventured into China in the late 1990s.

Home Depot is now planning to focus on taking the online route to reach the Chinese consumer.

Home Depot and have been working together for about 10 days, Tome said. Home Depot is also in discussions with Alibaba Group’s, she said.

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Late on Thursday, Home Depot said it would close all seven of its big box stores and cut 850 jobs in China as the retailer changes its focus in the Chinese market to online and specialty stores.

In June, Home Depot opened a paint and flooring store and a separate Home Decorators Collection store in Tianjin, China. While Tianjin is a second-tier city, Tome said the company was looking for sites in a bigger city like Beijing as well.

Credit Suisse analyst Gary Balter called Home Depot’s move to close its seven big box China stores a “prudent decision.”

    While the move was an acknowledgement that the big box approach may not be the best way to serve the Chinese market, it still made sense for Home Depot to continue to find ways to succeed in China as it already has sourcing offices and specialty stores there, and given the size of the market, he said.

    Balter estimates the Chinese market for paint, furniture and home furnishings at about $20 billion.

    Tome, who has had operational responsibility for the retailer’s China operations for about 18 months now, said she has learned a lot more about the Chinese consumer since taking over.

    For instance, Tome recently learned that Chinese customers like furniture with a smooth finish and have little appetite for “distressed furniture.”

    “It is our intent to keep learning,” she said.

    Home Depot shares were up 2.3 percent at $59.65 Friday on the New York Stock Exchange. They rose to as much as $59.70 earlier in the session.

    Follow Reuters Summits on Twitter @Reuters_Summits

    Reporting by Dhanya Skariachan, Jessica Wohl, Brad Dorfman and Phil Wahba; Editing by Phil Berlowitz

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