In Shanghai, a closer look at the Chinese consumer

SHANGHAI, CHINA —While the China International Hardware Show highlighted trends worldwide this fall, the event simmered with the promise of emerging markets, particularly within the show’s host country.

A huge variety of power tool vendors vied for eyeballs at the event, amid increasing participation from hand tool, lawn and garden, kitchen, bath and housewares makers.

Michael Dreyer, vp-Asia Pacific for Cologne, Germany-based show organizer Koelnmesse, explained that the show has traditionally been strong in the area of power tools and hand tools, but the categories of building hardware, locks and garden tools grew so significantly that they were given their own separate areas.

Innovations were the main new features of both power tools and hand tools. For example, German tool manufacturer Grizzly introduced its line of lithium ion gardening tools. Outside the garden tools arena, numerous manufacturers displayed incarnations of lithium ion power drills—manufacturer Shanghai Nova displayed a model with laser beam “guides” with the goal of offering more precise drilling. Other innovative angles were present in hand tools as well, such as a “digital” tape measure with a variety of special functions under the “Giant” name from NingboJF Tools Industrial.

The search for house-branded products was a draw for retailers. Prior to the start of the show, Steve Skells, an international stores buyer for Ace Hardware, said the show was “an opportunity for Ace to develop programs that will be stocked in our Shanghai warehouse to distribute to our international retailers.”

“We work with the attending factories to develop assortments in Ace label or other control branded packaging,” he added.

While Ace looked to stock its international stores, manufacturers looked to international markets with greater interest as well.

Gary Israelit, vp-sales and marketing for level and toolmaker Kapro, said his company was specifically targeting the Chinese market at the show, which he noted clearly was a more pro-oriented market than Kapro’s consumer-oriented market in the United States. Kapro sells its branded products through a number of chains and co-ops and also produces levels and other products under the Husky brand for Home Depot

But China isn’t the only international target for the manufacturer—“India, Japan, Korea, Brazil, Argentina, South America, especially Brazil, is a very growing market,” he said.

Israelit mentioned that a new Kapro factory is planned in Ningbo, a city just south of Shanghai. Ningbo was a familiar name at the show, gracing the banners on numerous booths, given its status as a center for hardware and tool manufacturing in the country.

Other manufacturers had a different perspective. At Grizzly, the German maker of lithium ion gardening tools, the show held hopes of attracting a greater European retail presence, in addition to its distribution through Germany’s DIY giant OBI.

“Lithium ion is, in Germany, very popular—it’s a big boom now,” said Andreas Klotz, sales manager for Grizzly.

Still, the manufacturer is less focused on Asian markets—though not ruling them out,” Klotz said. “We do not want to sell in Asia right now, at least not in the next one or two years.”

The China market now

Dreyer gave some insight into the Chinese DIY market, which is coming into increasing focus as rules of homeownership are shifting in the country and more Chinese citizens are owning their own homes and apartments. He said there still are some factors holding back the DIY market in China, specifically the cost of labor.

“The fact is that the cost of labor is so low, it’s still very economical to hire someone to do a project,” he said.

However, for this reason, the pro market in China remains an area with greater potential to tap. Zhang Dongli, president of the China National Hardware Association, agreed with this assessment. Speaking through a translator, he first told HCN that DIY has entered the lexicon of the average Chinese consumer in the past decade, but it has not yet become a strong trend in the market.

“It’s early for this to be popular with Chinese people. But the future of DIY will increase as China develops more,” he said. An other factor, he added, was the hectic pace of life in much of China—long work hours and a perception that doing home improvement projects is more work, rather than a hobby, has kept the consumer DIY market from taking off.

The real areas of growth, however, are in building materials, according to Dongli. He estimated that sales of building materials have soared 35 percent in the past five years, while sales of bath and kitchen hardware have risen 20 percent countrywide.

Since the market for home improvement projects in many parts of China is largely “do-it-for-me,” pros make up a large portion of home improvement product consumers. And with a great deal of construction going on in large Chinese cities—particularly Shanghai—building materials and fixtures are doubly poised to sell well in the future, Dongli said.

Outside the show itself, a visit to a Shanghai B&Q store—an English big box home improvement chain with a similar look and feel to Home Depot—told more of the story.

While not crowded on a Thursday afternoon, the retailer was clearly ready for customers. Two to three store employees waited at the ends of each aisle, hands clasped behind their backs, chatting and eager to help any and all passersby. Prices ranged from American equivalents—a round $20 for approximately a gall on of paint—to the notably inexpensive. Some flooring tiles sold for less than a dollar per square meter; a full toilet was advertised at $43.

Highlighting the do-it-for-me trend at the B&Q store, a separate consulting area for home improvement planning at the store’s entrance was much busier. Several couples consulted with store employees, doing project planning on computers. Other couples roamed the aisles, viewing bath and powder room vignettes. Power strips and CFL light bulbs were popular impulse items.

Looking toward 2009

But the immediate potential for DIY success remains cloudy in China. Israelit summarized the experience so far with a shrug, saying, “What is the potential here? Well, what can I say, we’re taking a chance.”

As for next year’s China International Hardware Show, growth, at least in terms of square footage—approximately 1 million square feet this year—will stay the same, due in part to economic factors facing a number of worldwide markets. The show is expected to move toward “controlled growth,” said Shi Seng Lan, vice chairman and secretary general for the China National Hardware Association. Lan further emphasized a greater amount of programming and other new quality features, attractions meant to add value in an overall worldwide economic climate that is expected to slow down, she said.

While the size will remain consistent with this year, Dreyer also noted that next year’s show will include a separate space for manufacturers of fasteners, a growing category in the marketplace. Next year’s China International Hardware Show will take place at the same venue, the Shanghai New International Expo Center, Sept. 16 to 18, 2009.