Retreat by Macy’s from Chinese market shows localization woes

By Shen Weiduo Source:Global Times Published: 2018/12/5 22:33:03

Foreign retailers should adapt experience to realities of mainland market, analysts say

Customers wait outside a Macy's store in New York for Black Friday sales on November 22. Photo: VCG

International retailers should localize their operating models and adapt to local conditions and demand, instead of just doing what they've done for years back home, if they want to succeed in the Chinese market, analysts said.

These outsiders have to learn from their Chinese counterparts, who have tried and true operating models that could help them gain a further foothold in the country, analysts noted.

The comments came as US-based retailer Macy's stopped taking orders on its online store on Chinese e-commerce platform on Monday. This is Macy's only sales channel in the Chinese mainland, so the move means a full retreat from a direct presence in the market.

The decision follows the closure of the US retail giant's Chinese official website in June, and it also ends a joint venture set up less than three years ago with Hong Kong-based Fung Retailing to explore China's retail market.

An online customer service employee of Macy's told the Global Times on Wednesday that "We made the decision since our contract with Alibaba's Tmall will end on December 31, and we welcome customers from all over the world to order on the Macy's US official website.

"We won't have any other sales channel in the mainland," the person said.

Liu Hui, an analyst at Uni-retail Business and Management Co in Beijing, told the Global Times on Wednesday that the US company's retreat from the Chinese mainland market mainly reflects its poor localization strategy, which failed to attract local customers.

"Macy's operating structure is not flexible enough to change from the US style to cater to Chinese customers' consumption habits," Liu said. "Best sellers in retail stores (in China) are mostly cosmetics and bags, while Macy's emphasizes clothes. It also failed to localize its clothes."

"Clothes in Macy's are old-fashioned, and the styles don't suit Asian people," a Beijing-based white-collar worker surnamed Chen told the Global Times on Wednesday. "For what it sells, I think the prices are too high. I can find something exactly the same but at a lower price."

Liu Dingding, a Beijing-based industry analyst, attributed the company's failure in China to being unable to catch up with the fast-changing and diversified demand of Chinese consumers. "The market in China is changing much faster than those in the US and Europe. These Western giants seem to react a bit slower than their Chinese counterparts."

Macy's isn't the only overseas retailer that faced problems in China. British retailer Marks & Spencer announced it would close its Tmall flagship store in January 2018 after closing all its physical stores in China in 2016.

Other foreign brands, including Mango and Best Buy, have made headlines in recent years owing to their localization struggles in China.

Despite the difficulties, Liu Dingding said that more foreign brands will grab the opportunity to enter China, with the rapid rise of the domestic middle class and the nation's policy of reform and opening-up.

Experts noted that with the right strategy, foreign brands could still make a fortune in China.

"Securing a local partner is one way - for example, WalMart and Carrefour's partnerships with Tencent are good options to localize and learn from Chinese experience," Liu said. "They have built up operating experience with years of success back home. But before applying this experience in their Chinese operations (they should) respect Chinese culture, hire more Chinese executives and try to adjust the way that they have operated for years back home. That's the first step to gaining a foothold in the Chinese market," Liu Dingding noted.

Newspaper headline: Retreat by Macy’s shows localization woes


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