China Consumer

63 types of hinge is too many

B&Q’s British-style approach fails, so it looks to emulate a Swedish success

What works in Basingstoke may not in Beijing

“Chinese people have the money, intention and desire to improve their homes,” David Wei, the former head of B&Q China, said in 2003.

He was right for the most part. But what Wei didn’t foresee at the time was that, when it comes to home improvement, most Chinese don’t want to do it themselves. Early this year do-it-yourself chain Home Depot grabbed headlines when it shut all of its stores in Beijing. And home furnishing giant B&Q hasn’t fared much better, racking up annual losses.

B&Q, part of Britain’s Kingfisher retailing group, first opened in China in 1999 with a huge store in Shanghai, identifying the Chinese market as a strong source of growth in years to come. It opened more than 60 stores in the next 4 years. But in 2009 the company closed a third of them, and downsized a further 17.

What went wrong? Ian Cheshire, B&Q’s chief executive, admitted that operations had expanded too rapidly. The business model has also proved vulnerable to downturns in the housing market, including the recent drop-off in sales activity brought about by Beijing’s cooling measures. B&Q has been “clobbered” in some cities by the slowdown, Cheshire admitted to the Financial Times.

B&Q has been trying to reduce some of its reliance on the market for fitting-out new apartments for some time. Last year, to promote revenue growth, it revamped 36 stores and reshaped its product range, bringing down the total number of products from 140,000 to 50,000 (the company said there were 63 different types of hinges alone). It also parachuted 600 of its UK and French operations staff into Chinese stores, hoping that they could give a fresh perspective on how best to jumpstart sales.

One outcome? A walk through a revamped B&Q store now feels a lot more like a trip to IKEA, reports CBN Weekly. Which is deliberate: “If you go to IKEA on a Saturday in China, you just see this mad scrum of people,” Cheshire told the FT admiringly.

Accordingly B&Q executives are now doing more to promote a shopping trip as an aspirational event, especially for customers with little sense of how to decorate a home, and now eager to see how it is done in the West. Plenty of IKEA’s shoppers have been seeking inspiration, it seems, although others simply turn up for recreation, as if it were a theme park experience (see WiC27).

So like the Swedish giant, new B&Q stores feature room-style display areas complete with wallpaper, paint, lighting and matching fabrics. The company has hired design staff to help customers with decoration themes.

It is also offering free DIY classes, hoping to convert more Chinese into spanner-wielding home improvers.

Attractive store displays also encourage customers to spend more, and higher-end bathroom brands like TOTO and Kohler recorded a spike in sales after the turnaround plan was implemented.

“Comfortable shopping environment and intuitive product comparison is more conducive to sales,” says Lin Qi, a designer for Kohler.

The turnaround plan doesn’t come cheap (Cheshire says it is costing £107 million to complete the revamp) but CBN Weekly said B&Q is trying to offset some of that by introducing more private-label goods, which often have higher margins.

The early signs are that the plan could pay off. Pilot stores in the programme have seen, on average, a 7% improvement in sales and B&Q returned to the black in the fourth quarter of last year.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.