KFC's competitors in China also use the American food chain's low-cost, fast-food model to stamp their market footprint.
KFC's competitors in China also use the American food chain's low-cost, fast-food model to stamp their market footprint.

China proves resistant to do-it-yourself stores



While foreign brands such as McDonald's are flourishing, DIY and home-improvement businesses such as IKEA find that many Chinese are browsing to get ideas, not to buy

Two announcements from global high-street chains last weekput into sharp focus the reality that success in China cannot be taken for granted.

The economy might be vast and growing at a breathless pace, but the "Chinese characteristics" that the country often speaks of mean bumper profits enjoyed overseas are sometimes difficult to replicate in the local economy.

The fast-food chain McDonald's said a few days ago it was looking to open as many as 200 restaurants in China next year, to add to 165 openings on the mainland this year. The company's restaurant tally in the country is already a supersized 1,100, two decades after those famous golden arches made their first appearance in Shenzhen in the south.

It is an astonishing pace of development. Yet, remarkably, it is exceeded by the growth of KFC, which with its buckets of chicken pieces has, unlike in other markets, stolen a march on Ronald McDonald and his burgers.

But even if it trails its arch-rival, McDonald's still enjoys a hefty presence in the world's most populous nation.

The success of both chains has spawned countless local competitors, many of them focusing more on Chinese food but using the low-cost, fast-food model of almost identical restaurants that KFC and McDonald's have used to such effect. Some local brands have upwards of 200 restaurants in the country but seem unlikely to challenge the big hitters from overseas.

A second expansion announcement last week showed that in other sectors, western retail chains can find life much tougher going.

The Swedish furniture retailer IKEA said it was looking to double the number of stores it has in China over the next five years. This sounds impressive but is less so when you consider that IKEA currently has a modest eight stores in China, 12 years after opening its first in the country.

Of course, a home furnishing chain that specialises in vast superstores is never going to rival a fast-food brand in terms of store numbers.

But IKEA's store tally does in a sense reflect wider difficulties that do-it-yourself and home-improvement chains have had in China.

IKEA has had to cut margins drastically to drum up business, while the British chain B&Q has found life even tougher going in China. Last year, after posting losses of millions of pounds in China, it announced it was closing or downsizing almost 40 stores, about two thirds of its total.

It is all the more surprising given China's property boom, with many people enjoying the chance to own their home for the first time and moving into much bigger apartments than their parents could have dreamed of. The foreign home-furnishing chains should be raking it in.

Yet cut-throat competition from the tens of thousands of local "aggregators" that sell a variety of brands under one roof is said to have made life difficult for the big chains from abroad.

There have also been reports that customers have enjoyed the hospitality of the large furnishing chain stores and then gone home with only ideas and a set of measurements to find a carpenter to make a cheaper version of what was on display in the showrooms.

Having said that, given IKEA's current prices in China - a coffee table now costs little more than a cup of coffee in Starbucks - it is hard to imagine there are many savings to be made by ordering a locally made copy.

It could not be more different from the fast-food sector, where it is the western chains that hold sway over their Chinese counterparts, not the other way around.

One overall lesson from the contrasting fortunes in China of the foreign chains in the two sectors is that local market characteristics can make the difference between success and failure.

China offers vast and growing opportunities, just ask McDonald's and KFC, but the best-laid plans by well-managed foreign chains can be turned upside down by China-specific factors, as anyone faced with the formidable task of turning a profit at a DIY store in the country can attest.

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Tips for job-seekers
  • Do not submit your application through the Easy Apply button on LinkedIn. Employers receive between 600 and 800 replies for each job advert on the platform. If you are the right fit for a job, connect to a relevant person in the company on LinkedIn and send them a direct message.
  • Make sure you are an exact fit for the job advertised. If you are an HR manager with five years’ experience in retail and the job requires a similar candidate with five years’ experience in consumer, you should apply. But if you have no experience in HR, do not apply for the job.

David Mackenzie, founder of recruitment agency Mackenzie Jones Middle East