IKEA in China – how IKEA localises its business model for Chinese customers

I have posted this blog before on my website about how IKEA adjusts its business model for localisation, thinking it is a good chance to share with you to discuss. Any thoughts and comments are welcomed 🙂

“宜家(yi jia)” is the Chinese name of IKEA, which literally means “Suitable and nice for your home”. Efforts can be seen in the process of expanding IKEA’s market from Europe to North America, from western countries to the oriental world, like Japan, China, South Korea, etc.

In order to set foot in local markets in different countries, IKEA does do many changes to its business model. I want to share some interesting points that I found about how IKEA adapt to the Chinese market.

Target customer segment: In western countries, IKEA serves as the furniture provider for everyone and gets its popularity especially among families with middle or low level income. But when IKEA opened its first store in Beijing in 1999, IKEA products’ high prices scared aways many price-sensitive consumers in China. After realising this, IKEA decided to target its consumer group of young middle-class professionals, who get relatively higher salaries, are better educated and have better understanding of western cultures and design styles. This major strategy change helps IKEA to build the impressions of itself as an aspirational western brand and get many customers.

Value Proposition: in Europe, the value proposition mostly focuses on good quality and stylish furniture with affordable prices for everyone. In China, it slightly changes to good quality, western or more nordic designed aspirational brand for middle-class consumers.

Store location – How the customers are reached? As we can see in many cities, like in Stockholm, IKEA stores are mostly in suburbs with easy access by car. The driving time from Stockholm central to both of the two IKEA stores nearby is about 20 minutes. But considering the situation in China, “Only 20 percent of visitors in Shanghai have cars”, says the marketing manager of IKEA China, Ulf Smedberg, you often find the IKEA stores in the outskirts of cities near public transportation station. Actually I have been to one IKEA store in Shanghai which is quite in the city center, just walking distance away from Shanghai Stadium and two nearby metro stations.

Due to the efforts that IKEA has put to the Chinese markets, IKEA becomes more and more famous and popular in China now. Currently there are 18 IKEA branches in the mainland of China, including 8 of 10 largest IKEA stores in the world. And IKEA China is becoming one of the most important space in business growth thanks to the rapid growing middle-class population in the big cities.

References:
http://www.chinabusinessreview.com/ikea-with-chinese-characteristics/
http://www.businesstoday.in/magazine/lbs-case-study/how-ikea-adapted-its-strategies-to-expand-in-china/story/196322.html
https://en.wikipedia.org/wiki/IKEA
http://brandongaille.com/ikea-business-model-and-marketing-strategy/
http://www.theguardian.com/business/2014/sep/09/ikea-sales-rise-china-middle-class

By Zhihao Yang