Credit: Kingfisher

Kingfisher is the latest western retailer to get out of China

DIY never really caught on in the Middle Kingdom.

by Rachel Savage
Last Updated: 31 Mar 2015

Kingfisher has sold off a controlling stake in B&Q China for £140m. Not a surprise – it’s been searching for a ‘strategic’ partner since March – but a reminder that yet another western company has failed to crack the enigma that is the Middle Kingdom.

The 70% stake is being sold to Wumei Holdings, which owns supermarkets and department stores including Wumart and Merrymart across China, in the first half of 2015, subject to say-so from the Government’s mandarins.

‘This will enable us to focus our financial resources and management talent on the large and attractive European home improvement market,’ new chief executive Veronique Laury said (although France, until recently its largest market, isn’t exactly looking ‘attractive’ right now).

Kingfisher entered China in 1999, expanding to 39 stores with 3,000 staff as the property market boomed. But B&Q China’s sales fell 10.6% year-on-year to £97m in the quarter to November 1st and racked up a loss of £4m, the same as in 2013.

Then, the company blamed the poor show on China’s slowing housing market, but the fact is newly wealthy homeowners there just aren’t that keen on DIY. You’d think western retailers might have been more attuned to that given how cheap labour is there, but US B&Q equivalent Home Depot also gave it a go, before admitting it had met its match two years ago. Whether Wumei will be able to crack that particular nut with its local knowledge, or will use the stores for its other businesses, is another question.

It’s not just DIY that has failed to catch on out east, though. Numerous other retailers, including mega supermarkets Carrefour and Tesco, have struggled to catch on with the Chinese consumer. Local brands, quite simply, do it better.

So the decision of companies including Burberry, Asos and US wholesaler Costco to open online stores with Alibaba’s TMall, an online marketplace and the most visited ecommerce site in China, looks like a sensible one. Most western brands will either follow or do a Kingfisher and get out of the way of the dragon's fire.

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