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.
October 29, 2012
When 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 Chronicle.
“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 closing.
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.
“There has been an explosion of specialty retail,” Tomé says. “China is too big to ignore.”