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69
Home Improvements in China
Doing up the Middle Kingdom
Shanghai and Shenzhen
A boom in private housing is fuelling a new market for home decora-
tion and could change the way the Chinese shop
Gaudy paper lions dance between shopping trolleys. The store is
full bright lights, banner; and orange-clad helpers beaming at the
throng of eager shoppers. In one corner, children hammer together
pieces of wood, while in another rapt adults are watching a product
demonstration. Everywhere, customers are pulling items off shelves to
touch and even smell them. But this is no toyshop at Christmas. It is the
recent opening of B&Q’s newest store in Shenzhen. "Home improve-
ment" has arrived in China – and with it, a potential shopping revolu-
tion.
As with so many opportunities in the world's most populous
country, the market promises to be huge. B&Q, part of Britain's King-
fisher retailing group, estimates that one-tenth of China's 400m house-
holds have "western" levels of disposable income, with $1,000 or more
a year to spend on home improvements. That number is increasing rap-
idly. Government deregulation (Chinese used to rent accommodation
from their work units) is boosting home ownership by 30 % a year.
Along with home ownership comes an interest in decor. China's home-
improvement market, estimated to be worth almost 200 billion yuan
($24 billion) two years ago, has since grown much bigger. "Chinese
people have the money, intention and desire to improve their homes,"
says David Wei, head of B&Q China.
In readiness, foreign chains are trying to move quickly ahead of
new rules that will allow them to open shops anywhere in China from
December 2004. B&Q is already China's biggest chain by sales. Its for-
eign rivals include Sweden's IKEA and Germany's Obi. America's giant
Home Depot, which already has links to Homeway, a Chinese chain,
may enter in its own right. China's domestic retailers, including
Homemart (the second biggest), No 9 and Orient Homes, are expand-
ing. B&Q plans to open 12 new stores a year. It has doubled sales each
year since it opened its first store in China in 1999, and will have 15
stores in seven cities by the end of the year, including its largest-ever
70
store, which opens in Beijing in October. Steve Gilman, head of B&Q
International, wants to have 75 stores in 30 Chinese cities by the end of
2008. If everything goes to plan, analysts think that by 2010, China
could contribute £3 billion ($5 billion) of sales and £185m of operating
profit, one tenth of Kingfisher's present operating profit.
Trust me
But that would require big changes in how retailing works in
China. The key advantage foreign chains currently have is trust. Chi-
nese shoppers are used to being sold shoddy goods backed by dodgy
guarantees. Their defence is to negotiate fiercely and examine goods
carefully. Wandering around B&Q’s Shenzhen store, 34-year-old Yuan
Ye is reassured by the fact that it is foreign. "I can trust international
retailers," she says. Signs around the shop promise "no fakes" and
money-back guarantees. In China, B&Q even takes customers to work-
shops to reassure them about quality.
Ms Yuan also likes the idea of one-stop-shopping. In China, re-
tailing is over-specialised. Along Hong Kong's home-improvement
alley, Lockhart Road, one store sells door handles, another paint and
yet another paintbrushes. On the mainland, new homes are often con-
crete shells, with no plumbing or even dividing walls. Decorating takes
enormous energy, requiring trips to scores of stores, and a hunt for a re-
liable contractor. B&Q is profiting from this. Its "home solutions" ser-
vice will fit out an entire house, including furniture, and guarantee all
the work. It is proving to be very popular, boosting B&Q’s same-store
sales in China by 19 % this year and prompting it to experiment with
the same service back in Britain, where the home-improvements busi-
ness is more popularly known as do-it-yourself (DIY).
The big challenge facing B&Q, and its rivals in China, is that most
customers are not doing it themselves. "Chinese DIY is still really BIY –
buy it yourself," admits Mr Wei. Government policy is to build homes
that are more finished, so B&Q needs to turn DIY into more of a hobby
and the Chinese into a nation of home improvers, like the Americans and
British. Yet middle-class Chinese feel it is beneath them to build a cabi-
net or fit a shelf and, thanks to the abundance of cheap labour, have
never had to. Many Chinese don't know how to wire a plug or rise to the
challenge of scumble painting. So the company is giving its customers
Home Improvements in China store, which opens in Beijing in October. Steve Gilman, head of B&Q
International, wants to have 75 stores in 30 Chinese cities by the end of
Doing up the Middle Kingdom 2008. If everything goes to plan, analysts think that by 2010, China
Shanghai and Shenzhen
could contribute £3 billion ($5 billion) of sales and £185m of operating
A boom in private housing is fuelling a new market for home decora-
tion and could change the way the Chinese shop profit, one tenth of Kingfisher's present operating profit.
Gaudy paper lions dance between shopping trolleys. The store is Trust me
full bright lights, banner; and orange-clad helpers beaming at the But that would require big changes in how retailing works in
throng of eager shoppers. In one corner, children hammer together China. The key advantage foreign chains currently have is trust. Chi-
pieces of wood, while in another rapt adults are watching a product nese shoppers are used to being sold shoddy goods backed by dodgy
demonstration. Everywhere, customers are pulling items off shelves to guarantees. Their defence is to negotiate fiercely and examine goods
touch and even smell them. But this is no toyshop at Christmas. It is the carefully. Wandering around B&Q’s Shenzhen store, 34-year-old Yuan
recent opening of B&Q’s newest store in Shenzhen. "Home improve- Ye is reassured by the fact that it is foreign. "I can trust international
ment" has arrived in China – and with it, a potential shopping revolu- retailers," she says. Signs around the shop promise "no fakes" and
tion. money-back guarantees. In China, B&Q even takes customers to work-
As with so many opportunities in the world's most populous shops to reassure them about quality.
country, the market promises to be huge. B&Q, part of Britain's King- Ms Yuan also likes the idea of one-stop-shopping. In China, re-
fisher retailing group, estimates that one-tenth of China's 400m house- tailing is over-specialised. Along Hong Kong's home-improvement
holds have "western" levels of disposable income, with $1,000 or more alley, Lockhart Road, one store sells door handles, another paint and
a year to spend on home improvements. That number is increasing rap- yet another paintbrushes. On the mainland, new homes are often con-
idly. Government deregulation (Chinese used to rent accommodation crete shells, with no plumbing or even dividing walls. Decorating takes
from their work units) is boosting home ownership by 30 % a year. enormous energy, requiring trips to scores of stores, and a hunt for a re-
Along with home ownership comes an interest in decor. China's home- liable contractor. B&Q is profiting from this. Its "home solutions" ser-
improvement market, estimated to be worth almost 200 billion yuan vice will fit out an entire house, including furniture, and guarantee all
($24 billion) two years ago, has since grown much bigger. "Chinese the work. It is proving to be very popular, boosting B&Q’s same-store
people have the money, intention and desire to improve their homes," sales in China by 19 % this year and prompting it to experiment with
says David Wei, head of B&Q China. the same service back in Britain, where the home-improvements busi-
In readiness, foreign chains are trying to move quickly ahead of ness is more popularly known as do-it-yourself (DIY).
new rules that will allow them to open shops anywhere in China from The big challenge facing B&Q, and its rivals in China, is that most
December 2004. B&Q is already China's biggest chain by sales. Its for- customers are not doing it themselves. "Chinese DIY is still really BIY –
eign rivals include Sweden's IKEA and Germany's Obi. America's giant buy it yourself," admits Mr Wei. Government policy is to build homes
Home Depot, which already has links to Homeway, a Chinese chain, that are more finished, so B&Q needs to turn DIY into more of a hobby
may enter in its own right. China's domestic retailers, including and the Chinese into a nation of home improvers, like the Americans and
Homemart (the second biggest), No 9 and Orient Homes, are expand- British. Yet middle-class Chinese feel it is beneath them to build a cabi-
ing. B&Q plans to open 12 new stores a year. It has doubled sales each net or fit a shelf and, thanks to the abundance of cheap labour, have
year since it opened its first store in China in 1999, and will have 15 never had to. Many Chinese don't know how to wire a plug or rise to the
stores in seven cities by the end of the year, including its largest-ever challenge of scumble painting. So the company is giving its customers
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