Barbie Humbled by China

With the closure of a flagship Barbie concept store in Shanghai this month, the American doll has sashayed her way out of the Chinese high street and turned her back on one of the most unpredictable retail markets in the world.

The six-storey Barbie store was one of Asia’s more startling retail outlets, with its catwalk for little girls, its flurry of pink and its restaurant and spa.

Its arrival was also seen as a sign of growing consumer sophistication in China. Barbie, of course, remains a big seller in China, but it seems that a shopping emporium dedicated to her may have been too much too soon.

Rampant growth in the Chinese economy has transformed the world’s most populous nation into a draw for global brands. Retail sales grew at a monthly average of 18 per cent last year.

Still, Chinese consumers do not always take to global brands, as some high-profile retail setbacks in recent years have shown.

Last month Best Buy, the world’s largest consumer-electronics retailer, announced it was closing all nine of its stores in China that carry the Best Buy name, as well as its head office in Shanghai, to focus on expanding the more profitable, domestic Five Star, a chain it acquired five years ago.

That followed an announcement by Home Depot that it had closed its last Beijing store because of “operational difficulties”. The home improvement chain has closed five outlets since entering the Chinese market in 2006, with just seven stores remaining.

Kingfisher, Europe’s biggest home improvement retailer, has learned the lesson of overreaching in China after struggling to make the B&Q brand work there.

Last year, the company’s underlying sales in China were down 16.2 per cent, said Ian Cheshire, the chief executive, adding he would decide on the future of the Chinese business in the next few months.

There are cultural reasons for the struggles of B&Q and Home Depot. The notion of “do it yourself” is a tough one to communicate in China, Ignatius Tong, who heads the consumer goods and retail competence centre at the strategy consultancy Roland Berger in Greater China, told the China Daily.

“It is very rare that a Chinese consumer will do it him or herself. You would use a contractor you know, perhaps through a friend,” Mr Tong said.

“They don’t really get this idea that it is a place you can go to get trusted service, a wide selection of products and where people from all walks of life can go in and buy … a light bulb or completely fix their house.”

The big names also struggle in the face of thousands of small Chinese manufacturers and outlets that sell on the edges of cities at bargain-basement prices.

According to research by AT Kearney, the so-called big box retailers are jumping the gun by being in China at all.

Management consultants reckon the big retailers are able to get a foothold only in markets where the per capita income is above Dh33,000 (US$8,984).

In China, the per capita disposable income in urban areas is a little above one quarter of that at Dh8,815.

But one would be wrong to write off international retailers in the world’s second-biggest economy. Some of the canniest companies are gearing up their operations and give a very good impression of knowing what they are up to.

The Swedish furniture giant Ikea is a major success and is planning to double the number of its stores here by 2015.

The UK supermarket chain Tesco, the world’s third-biggest supermarket group by sales after Walmart and Carrefour, both of which have important operations in China, has announced some ambitious plans.

Tesco has teamed up with a group of Asian investors to develop shopping malls in the country.

In this joint venture, with plans including three shopping centres in the cities of Shenyang, Xiamen and Fuzhou, Tesco announced with its consortium partner, Singapore’s Metro Holdings, that the project would be worth Dh1 billion.

So the departure of the Barbie store appears to be a stage in the evolution of the Chinese retail experience. Barbie will be back, though in a different form.

Leave a Reply

Your email address will not be published. Required fields are marked *