Home Depot to Buy Protégé Retailer in China

A decade ago, Home Depot began training executives at a small Chinese retailer, called HomeWay, on how to sell screwdrivers and shower heads. One tip was to paint its stores orange, Home Depot’s signature color.

Now, Home Depot is buying its retail protégé in a move that will give the giant American chain its first stores in the fast-growing Chinese market.

Home Depot said yesterday that it had agreed to purchase HomeWay, which has 12 outlets in cities like Beijing and Qingdao, for an undisclosed amount. People briefed on the deal said the purchase price was about $100 million.

With the acquisition, Home Depot will become the latest American big-box chain to enter China, a country that, despite its size and growing middle class, remains largely untapped by foreign merchants.

Wal-Mart agreed in October to purchase Trust-Mart, a Chinese retailer with 100 stores, people briefed on the matter said. And Best Buy said in May that it had bought a stake in the Jiangsu Five Star Appliance Company, an appliance and electronics chain.

Home improvement is a booming business in China, and several home-grown chains have mimicked Home Depot over the last decade, right down to its orange smocks and gritty metal shelves. HomeWay is considered the first such retailer in China, and its ties with Home Depot run deep.

In the mid-1990s, Home Depot agreed to share its practices with HomeWay, even inviting its store managers to stores in California for training sessions. Annette Verschuren, president of Home Depot operations in Asia and Canada, said executives at the companies have stayed in communication since, making HomeWay an ideal acquisition.

Home Depot has big plans for China, describing its purchase of HomeWay as a first step toward becoming the largest home improvement retailer in the country.

The company has a strong track record outside the United States. After entering Canada in 1994 and Mexico in 2001, it has become the largest home improvement retailer in both countries.

While China undoubtedly represents a huge market, its consumers are tricky for an American chain accustomed to homeowners who install their own kitchen cabinets and garage doors. Chinese homeowners, said Ms. Verschuren, “don’t do it for themselves; they are a do-it-for-me customer.”

Chinese shoppers, who generally live in standard-issue cement houses, typically enter a home improvement store with a contractor, who installs all the flooring, lights and plumbing, she said. “They get contractors to do everything,” she said.  （Source:The New York Times ,By MICHAEL BARBARO/CRIENGLISH.com)