Hostages, Store Lock-Ins Ensue As Home Depot Exits China
After the big-box store announced it
would close its seven remaining stores in China, employees, vendors and
home décor installers took matters into their own hands. http://www.treasuryandrisk.com/2012/10/22/home-depot-cfo-describes-nightmarish-exit-from-chi
Home Depot announced it would close the rest of its stores in Tianjin,
China on Sept. 14, 2012, workers fought back against its employer.
In one incident, employees took over four of the seven stores, locking themselves in and squatting for the weekend, the Atlanta Business Chronicle reports.
A team of trained home décor installers also rebelled against the news
by taking three hostages — a head lawyer, head of human resources and
head of operations — and releasing them from the Store Support Center in
Tianjin 80 hours later, says Home Depot CFO Carol Tomé tells the
“You need to understand that doing business in China is unusual,” Tomé says. “You have to expect the unusual.”
After the stores closed, vendors liquidated and sold store inventory
and also took Head of Operations Ben Lv hostage for a second time. The
employee unrest occurred despite the severance packages and outplacement
services Home Depot offered to the 850 employees affected by the stores
Entering The Chinese Market
The big-box store first entered the Chinese market in 2006, reports
the Chronicle. The chain bought 12 Home Way stores, which were already
set up similar to Home Depot stores in North America. Hoping to expand
on a growing middle class, the company opted to eliminate the middle man
and offer the Chinese-made products that it sold in North America to
shoppers in China.
The problem was that Chinese vendors were only licensed to sell the
products abroad, which forced Home Depot to ship the products from China
to North America and back again. Vendors also had the right to sell
their own products within the store, which conflicted with store
employees trying to do the same thing.
Another issue was that the middle class the big box hoped to attract
was not a do-it-yourself type of crowd. Even those that did shop the
store were used to haggling on price — a concept that conflicts with
Home Depot’s pricing policies. Tomé says communication was also
challenging, as the Chinese often say yes to be polite and helpful, even
if they do not intend to follow through.
“This is China. You have a culture that is different from the Western
culture,” Tomé tells the Chronicle. “Their way of doing business and
their way of interacting with others is different. We thought we
understood the cultural differences, but I can tell you we didn’t
understand them as well as we do now.”
Specialty Retail Is A Success
Home Depot has not completely left China; however, its operations now
include two small-scale stores inside shopping malls. According to the
Chronicle, one 1,300-square-foot store sells paint and flooring, while
the other offers a selection of furniture and home décor.
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