May 24, 2011,
Warren Shoulberg PUBLISHER/EDITORIAL DIRECTOR
The first Chinatown is the one everyone knows best. It's the one with only one-way streets, all running from China to the U.S., that supplies a huge chunk of the products American retailers sell and American consumers buy.
This is a place everyone is pretty comfortable with at this stage of things, and while it may have its ups and downs and challenges, it's where the industry lives.
The other Chinatown is a somewhat newer place, although it may look familiar in many respects. In this Chinatown, there are also only one-way streets, but they all run from the U.S. to China. This is the Chinatown where Western companies are selling their wares to the domestic market in China.
And this Chinatown has the potential to be the biggest boom town in the history of commerce.
At the recent round of furniture trade shows earlier this spring throughout China, a number of American companies set up shop not to export or meet with their American retail customers but to sell into China. The reaction was explosive, with thousands and thousands - that's three zeroes - of Chinese concerns interested in what the American companies had to offer.
What happened rather suddenly in furniture is really just a broadening of a trend that's been building for decades in China. There's a reason why there are 3,000 Kentucky Fried Chicken restaurants in China. There's a reason why Buick is one of the best selling automobile brands in China. There's a reason why young Chinese fashionistas are wearing Western clothing and not the cheaper Chinese knock-off apparel.
China is profoundly interested in Western products, and while we've seen very little evidence of this happening in the home textiles business, it's only a matter of when, not if. And the American companies that get in early will have a distinct advantage over the latecomers.
But it's not going to be easy. Many American companies that stormed into the Chinese market are leaving with their business tails between their legs. In the past few months alone, three big U.S. retailers - Best Buy, Home Depot and Mattel's Barbie brand - all announced they were closing their stores in China because they just weren't working.
Walmart has struggled with its stores in China as well, not truly understanding the local culture and buying habits quite as well as its largest competitor for the mass market, Carrefour.
So, American companies can't just get off the plane in Shanghai and say "Here we are" and wait for their businesses to take off. Think of all the overseas companies that have tried that here in the U.S. and how many of them have failed.
It took a long time for American companies to understand how to exist in the first Chinatown. It will probably take even longer to understand the second one.
But that journey has to start soon. Who better than Confucius to make that point: "It does not matter how slowly you go so long as you do not stop."
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