Barbie in China and the Retail Lessons to be Learned

I have read dozens of postmortems on Barbie’s recent closure in China, but none have resonated like “Shanghai Barbie Undressed: What’s to blame, consumer preferences or strategy” [link no longer exists]. This one resonated because (as far as I know) this is the only one by a true expert in China retail: Renee Hartmann. Ms. Hartman attributes the downfall of the Barbie store not to any inherent lack of interest in Barbie by China’s youth, but to strategic mistakes:

Mattel didn’t have a strategy for making money in the China retail market. They didn’t have plans for small retail stores, were not seeking out franchise customers to expand the Barbie brand throughout China, and did not have a coherent merchandising and store concept strategy that would have enabled them to expand throughout China. This lack of scale and a long-term retail business model for China created most of their problems that led to the closure of the store. Some of these problems included:

Merchandising issues: Because the Shanghai Barbie store was the first of its kind for Barbie worldwide, they had to piece together the merchandising in the store from various global lines from all types of retail outlets. Many of the products had to be imported into China – resulting in high prices from import duties and VAT taxes. And since they only had one store, they didn’t have the scale necessary to build a line dedicated to China. In the end, they had an unfocused, mismatched, expensive collection that didn’t directly address Chinese consumer preferences or needs.

Location: Running a street front store in Shanghai is challenging – even on a high profile street like Huaihai lu. Foot traffic is difficult to rely on, as most consumers hit the mall when they are doing serious shopping. Although the rent at the Barbie store must have been steep, I am sure it wasn’t as expensive as some smaller stores at the high profile malls in Shanghai – its just that the location didn’t generate the numbers or the “active shoppers” that it needed to justify the rent.

The downfall of the “experience” store: Experience stores have worked in the US, Japan and other markets, but I have yet to see an experience store work in China. Somehow cafes, spas, hair salons and other activities just don’t mix with retail in China (at least for now). I would attribute the reason for this to two factors: 1.) It’s hard enough to run quality retail in China. Adding running an F&B or service business, and things start to go downhill quickly 2.) Consumer shopping preferences in China are extremely difficult to change. Shoppers are used to going to specific streets or shopping areas for certain items – mixing categories just doesn’t seem to work that well.

What do you think?

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