Why Home Depot Failed In China

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Home Depot is the largest home improvement retail company in the world. But in China, the largest country by population, Home Depot is nowhere to be seen. And the reason? The Chinese market is different from the American market in almost every single way. For example, Home Depot almost always buys stores in suburban areas, which, in the United States, tend to be wealthy. In China, however, the wealthier customers live towards the center of the cities, meaning that Home Depot's locations were less than ideal. Similarly, Home Depot was essentially reselling Chinese products that people could easily find for cheaper prices in local stores. But the fundamental reason Home Depot failed is because China has a cultural bias against manual labor, where people feel that doing the work by yourself means that you can't afford labor. And that's why Home Depot failed in China.

Home Depot made one of the most common mistakes any company (even large ones) make when expanding internationally: they didn't consider culture. In countries other than the US, many American companies like Home Depot struggle with this issue. If you've seen some of my previous videos, you know that these mistakes happen to other companies as well. For example, Walmart failed in Germany for a similar cultural reason. In Germany, Walmart employees were told to be friendly and smile, which Germans felt were fake. Because they were fake, the Germans felt that the employees were acting nice just to get a sale, which made them not want to buy products from Walmart.

Ultimately, it is almost always culture that leads to the international downfall of American companies. Home Depot learned its lesson in China, just like the companies before Home Depot.

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