With a flair for design, Homemart shines - Supplement-7 - Brief Article

Home Channel News, March 6, 2000

While its main competitors in Shanghai -- B&Q and Xin Pin -- have staked their claims on the warehouse format, two-unit Homemart has established itself as an anti-warehouse -- a colorful, brightly lit, design-oriented supercenter.

As customers enter Homemart, they step into an elaborate collection of full-room vignettes that showcase the dealer's mid- and high-end kitchen and bath assortments. And as customers step out of the design center and into the main shopping area, they see the same attention being given to stylish merchandising and design throughout the 8,000-square-meter (86,021-square-foot) store.

Homemart's general manager, Wang Jiasheng, describes the powerful influence that product presentation holds in his stores.

"Display of merchandise is the number one concern," he explained. "It is the first thing I look at when I evaluate a department."

Homemart's emphasis on design is based on more than the personal preference of its director, however. The retailer believes this focus is necessary to convince Chinese consumers to spend money on big-ticket items like kitchen and bath remodels.

"Chinese people aren't used to making expensive purchases for their homes," Wang observed. "The [store's] presentation has to be attractive and make the consumers excited about the products." Nobody wants to pay 10,000 or 20,000 RMB (US$1,208 or US$2,416) for something displayed on a shelf or in an uninspiring fashion, he added.

This philosophy appears to be working for Homemart, as the company's greatest sales volume is being generated by the high-priced bath category. Wang refused to divulge detailed sales data, but he did say that bath products such as tubs, cabinets and tiles account for 30 percent of Homemart's annual sales. Wood flooring, the second most productive store category, performed only about half as well as bath, he noted.

The French Connection, almost While Homemart's merchandising and overall appearance are on par with many of the world's top-shelf home improvement retailers, its ownership is decidedly local. The company is a 100 percent government-owned retail operation that was founded on Sept. 21, 1998, when its first store -- a less elaborate 4,000-square-meter facility -- opened in northeast Shanghai. On July 22, 1999, Homemart opened the 8,000-square-meter supercenter on a popular retail strip in central Shanghai. The second store shares a parking lot with Carrefour, the French-owned hypermart. Carrefour, as it turns out, is not Homemart's only connection to France.

Homemart originally was planned as a joint-venture partnership between Wang's government-sponsored group and Leroy Merlin, France's multinational DIY giant. The arrangement -- in which Leroy Merlin would have shared its retailing expertise and been an investor -- was short-lived, though, and the French retailer pulled out before the first store opened, according to Wang.

While the partnership was brief, Leroy Merlin's influence on Homemart is lasting. Most obviously, Homemart's green, white and yellow color scheme is a replica of Leroy Merlin's store colors. More important, the French connection carried into store operations as well.

"Everything we did was foreign-influenced," Wang explained. 'The stock-keeping units, displays and merchandise were all designed on foreign [European] models." Though Wang credits Leroy Merlin with suggesting the broad product categories that were needed to set up Homemart, he also makes it known that his Shanghai staff does all of the brand analysis and selection. Like Xin Pin, its Shanghai competitor, Homemart claims its status as a Chinese-owned company gives it an advantage in understanding the product needs of the market.

"Our merchandise selection is strong here because we know the local market," Wang maintained. "We try to get the most popular items. It doesn't matter to me if it's an import or national brand. It only matters if it will sell." Like good retailers around the globe, Homemart regularly conducts market research, sending employees out into the city to question consumers and contractors on product usage.

One shift keeps overhead low

Wang is a sharp, energetic general manager who speaks passionately about his company and the prospects for the Chinese DIY market. Two topics that are particular favorites of Wang's are Homemart's store operations and its cost-control methods.

The retailer employs between 70 and 80 salespeople who work 9 a.m. to 6 p.m. weekday hours and 9 a.m. to 7 p.m. weekend hours. "We keep those hours so that we can operate only one shift," Wang explained. "Our competitors have multiple shifts and a higher cost structure." Wang has not seen evidence that the extra sales that could be made by staying open later would offset the additional payroll expense.

Training is done by regular workers, not a specific training and development team that is common within many Chinese companies. Merchandise knowledge is first and foremost, followed by management and sales skills. Homemart's vice director, Jia Jianyu, and two of his staffers run all back office functions, while only six buyers handle all departments in two stores.