With all the talk nowadays about how China is the next big thing, how simple it is to make your fortune over here, and how successful start up businesses can be, one might assume that pretty much all foreign industries have found success on the other side of the ocean. While many have, there are plenty others who have sob stories of crushing defeat in one of the world's largest markets. Read on for a sampling of foreign industry sectors that have still not quite found their footing amongst the Chinese.

1) Websites

Much has been made recently about Groupon's cataclysmic failure to make a dent in the Chinese market. Unfortunately, they are simply one in a growing number of website-based foreign companies that fail to appeal to China citizens – and often fail badly. Why? eChinacities' own Mark Turner says that a failure to cater to local tastes and habits in using online interfaces are the stumbling blocks which have felled foreign internet sites in China.

In the case of Groupon (or www.Gaopeng.com.cn, since the Groupon name had already been taken - by a Chinese competitor, naturally), their minimalist interface and scaled back design (ie: no flashing pictures or hot pink font) simply seemed cheap to Chinese consumers. MySpace, another epic failure by a foreign-run website trying to expand into China, did not bother to pinpoint and actively pursue a specific target audience the way that competitors RenRen.com and Douban.com did, says Turner. Some people theorise that the Chinese government intentionally makes things more difficult for foreign websites, instead preferring to promote domestic alternatives. Whatever the reason, website-based foreign firms are having a tough go at it in China.

2) Dairy

Dairy products in general have yet to become a staple household good in Chinese kitchens. While the French are never without a good wedge of cheese, the British need their clotted cream, and Americans just cannot do without their cookies and milk, the Chinese population is still disproportionately lactose intolerant. This may help explain why major international companies like Nestle and Danon (the world's largest yogurt maker) have both vastly reduced their presence in China.

The subsequent rise of domestic ice cream and yogurt makers, however, would seem to dispel the theory that Chinese citizens simply do not have the taste for dairy. According to The Financial Times, both Inner Mongolia Yili Industrial Group and China Menguniu Dairy have seen their share of the ice cream market (a 30 billion Yuan market a year!) rise to 17% and 15% respectively, while Nestle's share settles around 3%. Apparently these foreign dairy firms simply charge too much for a product that is now more easily accessible in China.

3) Home improvement

Considering most people do not actually own a home in China (and even those who do, do not actually own them if the government suddenly says that they do not), it might be understandable why home improvement stores like the American Home Depot or the British B&Q have fallen into oblivion in China.

Beijing Today believes that price has much to do with the firms' failures, saying they "ignored the price factor in a price-sensitive market." Others simply claim that those owning homes in China do not have the desire to piddle around the house performing random home improvements during their time off from work – it is simply not part of the culture. Additionally, there are still individual "mom and pop" shops that sell specific items separately, which is the model Chinese people are used to. And this, the failure to "localise properly," is a common theme among this list of failed foreign firms. B&Q, for one, was on a clear downward spiral for years and did little to change or adapt itself. After entering China in 1999, its financial descent began in 2008 and is continuing to this day, with management closing twenty-two of its sixty-three stores and downsizing seventeen others (www.europe.chinadaily.com.cn).

4) Electronic appliances

While electronics and electrical appliances are still big sellers in China (with, according to The China Daily, over 1 trillion Yuan worth of sales in China every year), foreign electronics companies still struggle to find the right balance of quality and price. The most obvious example of big-time failure comes in the form of Best Buy and its countrywide closures last year. At its peak, they had 170 stores around the country by the latter half of 2010. However, Best Buy was forced to shut its doors after sales continually slid. This is most likely due to the frequency of electronics "markets" (电子城) throughout China, places where electrical appliances (some of the real, most of them fake) are sold at a fraction of the cost of branded stores. While quality can sometimes account for a slight price increase, sometimes you simply cannot beat cheap.

As you can see, China is not always the easiest market to crack. It depends a little on the type of product being sold – for instance, Home Depot still retained much of their home improvement equipment when Chinese people are actually more interested in home décor (think IKEA). It also depends a lot on how well the company adapts to local Chinese taste, which we all know by now is quite different from the West. For example, Best Buy focused so much on customer service (something most Chinese people could obviously care less about) than on keeping prices competitive. China is certainly a land of opportunity, but no one is guaranteed success.
 

Related links
Masters of Deception: How Chinese Companies Become "Foreign"
6 of China's Most Successful Foreign Businesses
Foreign Companies Doing a Runner with China's Money

Warning：The use of any news and articles published on eChinacities.com without written permission from eChinacities.com constitutes copyright infringement, and legal action can be taken.

Keywords: foreign firms in China failed business ventures China opening up a business in China industry sectors China foreign firms corporate failures China