Retailers Struggle In China

NEW YORK ( TheStreet) -- Mattel ( MAT) has become the latest company to close down shop in China.

The toy maker said on Monday that is shuttering its Barbie flagship store in Shanghai just two years after its grand opening.

While Mattel said the store served its purpose in generating brand-awareness in the country, analysts say the company failed to adjust to the local market.

Retailers' Hard Bargain: China Watch

U.S.-based retailers have been struggling to adapt their business to woo the Chinese consumer.

Earlier in the month Best Buy ( BBY) said it would close all of its nine namesake stores in the country and its headquarters in Shanghai. The electronics retailer is instead choosing to focus its attention on its locally-based Five Star stores, which it acquired in 2009.

Best Buy, which entered China in 2003, plans to open 40 to 50 of the Five Star locations in fiscal 2012, with plans to operate between 200 and 210 stores by the end of that year.

In 2008, Best Buy withdrew from Beijing, at the time saying it was due to internal adjustments. The company opened its headquarters there in 2006, with the intention of choosing locations for its new stores and sourcing home appliances and electronics.

The electronics market in China is extremely price competitive and these shoppers would rather lower prices than the higher-priced service Best Buy was trying to offer, says Wall Street Strategies analyst Brian Sozzi.

Home Depot ( HD), which acquired 10 stores in China in 2006, has closed all but five of them in the past two years.

The biggest faux pas these three retailers made is not figuring out how to cater to the local consumer. Both Home Depot and Best Buy essentially transplanted their U.S. stores into China, Sozzi says.

Of course, there are retailers, especially in the luxury sector, that are surviving and thriving in China. Sozzi notes that Polo Ralph Lauren ( RL), Coach ( COH) and Tiffany ( TIF) are expanding their brand awareness in the country.

Gap ( GPS) entered China in November and has been tailoring its merchandising and sizing to local shoppers.

--Written by Jeanine Poggi in New York.

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