IKEA turns from global to local for lucrative Asia push
By Anna Ringstrom, ReutersMALMO, Sweden--Without a willingness to lug cheap flat-pack wardrobes home and wrestle with self-assembly, there would be no IKEA, but in Asia, where the locals have other ideas, the Swedish furniture giant thinks it still has a bright future.
March 8, 2013, 12:16 am TWN
As it expands in China and prepares to break into India, IKEA Chief Executive Mikael Ohlsson trusts that its core concept, influenced by painstakingly acquired local knowledge, will, over time, give it an edge.
“Most people don't really know and can hardly imagine that we visit thousands of homes round every store in the world every year,” he told Reuters at a store in Malmo in southern Sweden.
“We sit down in the kitchen and talk to them ... That's the way we try to learn and understand. 'What are you annoyed with? What are your frustrations? What would you like to have? How much can you afford? What are your alternatives?'” he said.
The group has already taken its huge out-of-town stores packed with modern Scandinavian style to 26 markets, with the product and experience instantly recognizable across them all.
But as it ventures further afield, it is tweaking its range and showrooms and adding services to accommodate new cultures.
One size doesn't fit all. In regions where apartments have smaller rooms, its showrooms have to be smaller. A sample balcony exhibit will be kitted out differently in northern China, where balconies are widely used for food storage, than in the south, where they often double as laundries.
Beds are bigger in the United States, but mattresses are firmer in China. And while stores will continue to carry about 10,000 products, the bulk of them from its standard range, the company stocks rice cookers and more chopsticks in the latter.
“As we become more and more global and we expand more in China and we grow into India, we will need, probably, to have a wider range,” Gillian Drakeford, IKEA's China retail chief said.
“Then each country will be able to secure relevance by taking the part they really need. But of course we will still secure IKEA's identity.”
In developed markets, IKEA is positioned as a low-priced mass-market brand, but in emerging markets where low prices are the norm, it targets a growing middle class that aspires to international lifestyle products. For these customers, design and a comprehensive range under one roof are the attraction.
“They have numerous kinds and styles of furniture in one mall, mostly covering all the furniture I need,” said Jane Wang, 21, an airport security inspector at an IKEA store in downtown Shanghai.
Price is much less a selling point in these new markets.
“IKEA loves little slogans like 'for the many people.' Those things are still true, but might be less true for some emerging markets,” said Neil Saunders at retail consultancy Conlumino.
“As IKEA expands globally, the price of global expansion is that the company does become less cohesive.”
Having more than doubled sales in the past decade to 27.6 billion euros (US$36 billion) last year, the firm plans to double them again by 2020 and open 20-25 new stores a year from 2015.
Growth will mainly be in existing markets — in China it has reached 11 stores in about a decade and aims to triple that pace — but also in new; in India, where it is expecting the final go-ahead to enter soon, it has a plan for 25 stores.