Home Depot's China Fail

MSNBC is reporting today about the embarrassing closure of Home Depot's last store in Beijing. Instead of rapidly penetrating the vast Chinese market, Home Depot now barely has a foothold on the mainland.

It's not that Home Depot should never have tried to enter China. With a rapidly growing population of homeowners, it's a market the company simply cannot afford to ignore, but their market entry strategy was obviously flawed. Their initial focus was on establishing their brand presence throughout the country rather than first understanding Chinese consumers. They discovered the hard way that Chinese buyers are extremely price sensitive and that few homeowners are comfortable tackling repairs on their own. In short, the business model Home Depot has relied on for decades to fuel its growth led it down the wrong path in China.

It's Not Just About Eyeballs

Daniel Lyons reports on financial problems at Digg and offers a warning for Web 2.0 outfits:

Digg’s collapse has become a cautionary tale for so-called Web 2.0 companies in Silicon Valley, even the current crop of superstars, like Facebook and Twitter. The basic problem is that these new-media companies don’t really have customers; they have audiences. Starting a company like Digg is less like building a traditional tech company (think Apple or HP) and more like launching a TV show.

Design Patterns for Online Businesses

There's really nothing new under the sun. Most ways of making money, including sophisticated financial products, frequently have analogs from other industries and historical periods. Michael Rappa summarizes the most common business models found online, categorized into nine archetypal design patterns:

• Brokerage Model—bringing buyers/sellers together
• Advertising Model—promoting products/services to an audience
• Infomediary Model—gathering information about an audience and monetizing it
• Merchant Model—selling goods/service either wholesale or retail
• Manufacturer (Direct) Model—selling goods/services directly to the user without an intermediary
• Affiliate Model—providing purchase opportunities wherever people may be
• Community Model—selling ancillary products/services in a community
• Subscription Model—charging for ongoing usage of a product/service
• Utility Model—charging based on how much of a product/service is used