SkyscraperCity banner
1 - 1 of 1 Posts

·
Moderator
Joined
·
121,773 Posts
Discussion Starter · #1 ·
Busy lifestyles a nail in homeware retailer's coffin
13 July 2009
South China Morning Post

Two years ago Europe's biggest home improvements retailer Kingfisher opened its first B&Q store in Hong Kong with its sights set on attracting home upgraders to its wide range of do-it-yourself products.

Now the British retailing giant is following in the footsteps of another failed venture by France's Carrefour nine years ago and preparing to shut down its only store in the city.

Market observers believe the city's fast pace deprives consumers of the time and energy to be the home handyman.

B&Q's location in Kowloon Bay and lack of sufficient advertising were seen as other reasons behind the poor performance. Hong Kong Island or New Territories residents normally would not travel that far for furniture when they could easily buy from Swedish home furnishing retailer IKEA or local competitor Pricerite as they have more extensive sales networks.

Steve Gilman, the chief executive of B&Q Asia, who spearheaded the group's drive into the region by opening stores on the mainland and in Taiwan before taking charge of the Hong Kong store opening, had told the Post last year that the retailer had not found the right locations with the right space at the right price, but it would keep searching in order to build up a network of smaller stores. That never materialised and Mr Gilman, a B&Q veteran of almost 30 years, retired last year.

Unlike Carrefour, which withdrew from Hong Kong in 2000 but continues to prosper on the mainland, B&Q is having difficulties across the border, too.

Kingfisher's China business, including the Hong Kong store, lost £52 million (HK$653.68 million) last year, widening from a £17 million deficit a year earlier.

In the first quarter of 2009, those losses swelled 25.7 per cent from a year earlier to £14 million while revenues fell 23.7 per cent from "mounting costs arising from running down stores", according to Kingfisher's quarterly report.

Kingfisher, which entered the mainland market a decade ago, attributed the poor performance to a rapid weakening of the housing market and the consequent fall in demand for new apartment fit-outs as well as overexpansion.

"The global financial crisis has had a profound impact on companies across all industries. For B&Q, the weakening business climate in the home improvement industry in China is further accentuated by the negative effect of the decline in consumer confidence," a B&Q spokesman said.

The group said in March it planned a major consolidation and revamp of its mainland stores. A net exceptional accounting charge of £107 million was booked, primarily reflecting asset impairments and around £30 million of cash that would be invested in revamping the remaining 41 stores.

But the group remained upbeat on its China business.

"B&Q is the industry leader in the mainland market and we firmly believe that our new proposition will lead the change in the industry and continue our success in China," said the spokesman.

Rivals were less sure about its prospects, citing increasing competition from local players.

"B&Q attracted consumers soon after it entered the mainland market thanks to its good reputation and high-quality products. But domestic players are also improving quality assurance and services," said one industry insider.

B&Q also attracted negative publicity in 2007, when a supplier sued for delayed payments, which caught media headlines, said its critics. Although the case was settled and both sides issued a joint statement expressing satisfaction with the outcome, the public relations war waged before the settlement tarnished the foreign player's image, they said.

More fundamentally, said industry players, Chinese consumers had not taken to the DIY culture, forcing a change of product line-up on B&Q shelves.

Domestic rivals, meanwhile, were enjoying increased access to private equity as a source of funding.

Shanghai-based Red Star Furniture Group, for instance, received about US$200 million from private equity firm Warburg Pincus and is aiming to have an initial public offering next year.

Red Star now has 50 stores around the nation and owns about 70 per cent of store properties.

Board secretary Guo Binghe said in an interview that the firm planned to open an additional 15 to 20 outlets this year.

"In this competitive market full of potential, if any firm, foreign or domestic, big or small, can win hearts of consumers, it can survive and prosper," said Mr Guo.
 
1 - 1 of 1 Posts
Top