For IKEA the action into the Chinese market was a big action, maybe as huge at the primary step abroad to Switzerland and the first store on foreign soil (Spreitenbach) in 1973 (Torekull, 1999). It indicated entering China and its gigantic– a minimum of potentially– consumer market. IKEA targets different group of individuals in China than in nations later in the IKEA ‘life cycle’ (i.e., life process based on how long IKEA has actually been on a market).
The primary target group is female clients– 65 % of all customers. Women, according to IKEA, represent modification in China and they welcome modification (and IKEA see them selves as offering the tools for modification in a minimum of one location).
Men are also part of the target group but more indirectly as ladies are the ones in the household having house furnishing interest and making the real choices. Customers are aged 25-35 (the core customer is around 30). Lots of from IKEA’s target group are what in China is understand as ‘the little emperors’: the generation born into the One Child Policy (today 15-27 years old).
This section of the population consists of some 30 million individuals. Among the attributes of this group of customers is that they are spontaneous, simple to affect and are really social. And dedicated to foreign major customer brand names (Gunnarsson, 1997). They are likewise known as the ‘the me-generation’ or ‘the lifestyle generation’ (e.g., Schütte & & Ciarlatte, 1999, p 139),.
IKEA’s consumers are likewise well informed, residing in huge cities in China. With increasing incomes of the target group, the target group for IKEA increases every year. The customer in China purchases less when they check out the shop than the IKEA average consumer. But in Shanghai for instance, the core clients go to IKEA regularly than anywhere in the world: 33% come every month. This implies– among other things – that there is a need for a lot of modification in the shop. The Shanghai shop reorganizes space settings a minimum of seven times a year, for new item or simply for different vacations and campaigns etc
IKEA’s offer is to supply affordable solutions to Chinese customers, but the overall image is another one (see below) forcing IKEA to offer other values to their Chinese customers. In the Shanghai stores primary market area the
core customers’ monthly household income is 6000 RMB. This is high by Chinese standards but in the IKEA world it is not very high: IKEA compares different countries by using a typical IKEA basket of goods. The Swiss only have to work 2 months to buy the basket while the Chinese will have to work 1 year and 6 months.
Some of IKEA’s major challenges are summed up in the citation below, featuring IKEA’s current Asia boss:
“When Ian Duffy was first put in charge of IKEA’s China stores four years ago, he spent hours at the checkout line observing customers. He didn’t see many. Instead, he saw plenty of people crowding the Beijing store for freebies – air conditioning, clean toilets and even decorating ideas. Adding insult to injury: shops right outside were offering copies of IKEA’s designs at a fraction of the cost. So, to lure shoppers, the Englishman launched what could be the cheapest IKEA non-sale items in the world: a scoop of vanilla ice cream in a cone for 12 cents. Thus began IKEA’s strategy to beguile the finicky Chinese consumer by slashing prices in China to the lowest in the world – the opposite approach of many Western retailers.” (The Wall Street Journal, March 3, 2006)
IKEA is used to be perceived as having low prices, this also one of the competitive cornerstones of the whole concept of IKEA (see above). But this is not the case in China; here the perception is a fairly exclusive western retailer, a store for the higher middle class (Lewis, 2005). For example, for the Chinese, Billy (the inexpensive, high selling book case) was perceived as a luxary (Jungbluth, 2006). While IKEA has accepted that to some extent, the main strategy has been to cut prices. And to do that, IKEA in China has been allowed to ‘break’ unbreakable codes and rules in the IKEA organisation.
China is a big sourcing country for IKEA. Still, for many products IKEA China sources were everybody else in IKEA sources, for example Poland. In China that has meant that imported product were subject to import taxes (22%) and
it also involved a lead-time of 12 weeks (it is now down to 5 weeks). To be able to keep cutting prices on the China market IKEA China has been allowed to exceed and expand its sourcing of products in China, while the rest of IKEA still sources the same products somewhere else in the world. The actual figures differ a little on how much in a Chinese IKEA store that is sourced in China. Some say that half of the products in an IKEA store in China are made in China, compared to 23% in IKEA stores overall (The Wall Street Journal, 2006). IKEA says 30 % and in addition to that 500 more articles were the local trading office are now looking for Chinese suppliers.
According to IKEA, this has really resulted in lower prices as prices have dropped at least 30% since 2003, on some products the price has dropped as much as 90%. IKEA’s single-seat Ektorp armchair retail for 112$ in China, 67 % lower price than one sold in the US (The Wall Street Journal, March 3, 2006).
IKEA, like many other companies doing business in China, is subject to copying. One observer noticed that many Chinese shoppers in IKEA were drawing pictures of the furniture and scribbling down descriptions of the products but not necessarily buying them. (Lewis, 2005). Copying IKEA furniture and style is to some extent easy. The catalogue and the store provide in many cases even measurements of furniture. And IKEA style home furnishing has in some areas become a concept of its own, outside the control of IKEA. If you search the baidu.com, a local Shanghai website, for ‘IKEA style’ you will get more than 39 000 hits. With a focus on delivering help in home decoration rather than individual products as such, it is easier to achieve a position that is not taken over by competitors that copy your individual products: the Karlanda sofa is easy to copy but not the home decorating skills provided by the company in the store, on the web site, in the catalogue etc.
While price will not in the foreseeable future be IKEA’s main argument in China, what is? IKEA tries to position itself as a company with an unique competence when it comes to interior design. Helping customers with this is the basic message, rather than selling individual products at low prices. Focus here has also been on selected areas, like storage. Many Chinese live in small apartments and IKEA can help with smart solutions for storage that makes life easier (is the argument). IKEA’s argument is very much about function while this contrasts to traditional furniture manufacturers in China were everything is about tradition.
From experience IKEA know that markets run through some kind of life-cycle: when stores open in a new country most customers buy what IKEA call market-hall products, i.e., everything but furniture. In established countries the proportion is said to be 65 to 35 between furniture and market hall products. It varies across IKEA stores in China but China has matured relatively fast with proportions between furniture and market hall fast approaching those in older markets like Sweden and Germany. Chinese see IKEA products as innovative and not traditional. Square tables are for example not traditional (round tables are tradition) and many of the colours used are not traditional to the Chinese.
Everything in an IKEA store, in China as everywhere else in the world, is sold under the private brand ‘IKEA’. In the Sweden shop in the IKEA store (outside Sweden) there are exceptions as it holds famous Swedish food and drink brands, but in home furnishing it is IKEA. According to IKEA, ‘IKEA’ is a well known brand. In Shanghai, 96 % in the catchments area of the store know of IKEA. Fortune Cookies (Dagens Industri, 20060505) first market and opinion poll in China shows that, among people with a monthly income of no less than RMB 2500, living in urban areas and aged 15-55, 75% know of IKEA.
The meaning of IKEA in Chinese is positive and very appropriate: IKEA’s translation in Chinese means ‘desirable for home living/comfortable home’ which is regarded as a very good translation in China. It is pronounced “Yi Jia”, similar to the English pronunciation of IKEA.
All products, here as everywhere else in the world, have Swedish names and the assortment in a Chinese IKEA store is very similar to one in the US, Sweden etc. In 1998 three products were added for China – chopsticks, wok with a lid and a cleaver – but they are now in almost every store around the world. The Chinese IKEA stores have a special set of tea cups for the Chinese New Year. Also, 500.000 plastic placemats are produced to commemorate the year of the rooster (Business Week, nov 15, 2005). At the moment mainland China, as well as in Hong Kong, the beds sold are shorter (190cm) than standard-sized beds (200cm). This is currently being reviewed but so far constitutes another adjustment in the assortment to fit demands in the geographical area. Many Chinese live in apartments with balconies and this space of the apartment is very important to the Chinese. IKEA has added settings in the store that show how you can furnish your balcony and a special balcony section in the stores (Lewis, 2005). Location and store formats
The big-box IKEA format is unusual in China were shopping traditionally is done locally and with specialist stores. IKEA stores in China are located closer to city centre than what is the case in other parts of the world were IKEA stores are usually located well outside city centre and suburbs. In China the location is closer to some type of city centre while the location is not exactly down town. A location well outside the city would not have been ideal in China as consumers do not have access to cars like European and US customers have. Here the stores have to be where public transportation can take people, and where there is some kind of hub where many people pass through. A good example is the Shanghai store which is very close to several bus lines and one of the metro lines in Shanghai. However, as the Shanghai store have 700 parking places under the store, IKEA is expecting Chinese shopping patterns to change in the future (= more private cars to go to the store).
Public transportation to the store is a contributing factor to the service level: home sending services are more common and more used here (while they are available also in other parts of the IKEA world). Also, outside the store in Shanghai (and outside other IKEA stores in China) you will see entrepreneurs setting up to transport home for people and also following that with actually putting the furniture together for IKEA consumers in their homes. In the new Beijing store – the larges IKEA store outside Sweden (the Stockholm ‘Kungens kurva’ store is the biggest in the world) interesting adjustments have been made to the store format. The store here have wider aisles to cater for the fact that IKEA stores in China have up to three times more visitors than IKEA store elsewhere in the world (The Wall Street Journal, 2006).
Advertising and promotion
One of the big differences when it comes to communication with the consumer in China compared to the rest of the world is the reliance on the catalogue. Here it is impossible – cost and reach wise – to distribute it like in many other countries. The catalogue is distributed in the store and in some of the primary market area but here the reliance is more on smaller brochures that are sent out several times during the year. These brochures are produced by the same people in Älmhult in Sweden that produces the catalogue, in order to make sure that the brochures have the same layout and IKEA ‘feel’ as the catalogue itself.
An example of PR activities is that IKEA a couple of years ago transformed the interior of 20 elevators in less affluent residential districts in Beijing. Nice environment in a dull place, this is to reach untapped markets (‘Change is easy’). PR activities are also important, taking Chinese journalists to Sweden and Älmhult, teaching them about Sweden and IKEA and the roots of the company. IKEA is known for its ‘out of box’ thinking when it comes to creating interest for IKEA and its products. IKEA in China is no exception. IKEA is supposed to have started or sponsored a TV-show were the viewers are offered lessons in home decorating
IKEA have run many different ads in China, in TV, newspapers and in print. Themes in campaigns are the same as everywhere in the world but with the Chinese twist (be different, break tradition). Maybe the IKEA advertising line in China is a little ‘softer’ than in other places like in the UK. More humble advertising, do not stand out very much, friendly, home furnishing solutions, educate the consumer, offer partnership for the future in new home furnishing solutions. The ad featured below is typical:
The message of the ad is ‘Small changes, a refreshing new life’. Life can be made better, easier and nicer with small means. Small changes are the key word in IKEA ads and in-store. Other ads that IKEA have run have the theme of “do not be like your parents”, a theme that seems to speak directly to IKEA’s target group of young women 25-35 years old (Lewis, 2005).
The web sites of the different stores in China is also argued to be important: the Internet is a common source of information for the target group, the younger middle class. Also, this source is used as a way to educate customers before coming to the IKEA stores on the concept and how the shopping experience will be (see below also). 12
IKEA Family was introduced in China in 2007 and much is expected from how this will work to attract Chinese customers.
The selling environment and service
While the products available in the Chinese stores are basically the same as in any IKEA store in the world, the stores do not look the same inside. What IKEA tries to do is to build the room settings not like in the US, not like in the UK or Sweden but in a way that feels relevant to Chinese customers with sizes of rooms and kitchens that are realistic by China standards. So even with the same products, the aim is to make the store in Shanghai look very different from the one in Malmö by the set-up of rooms. Thus: basically the same product range – but adaptation in the store: presentation of goods and home solutions offered. In China the store layouts reflect the layout of many Chinese apartments. One obvious example was mentioned earlier, balconies are present as many Chinese apartments have balconies. (The China Business Review, July-August, 2004).
Overall the shopping experience is different. As other customers are an important part of the shopping experience the way the store is used – as reported above – by Chinese consumers not only as a shop but also as a social area, make for an (compared to IKEA stores in Europe and the US) different experience. In the beginning, Chinese came not to shop but to socialise in a nice atmosphere, unlike other furnishing shops in China (were you are not allowed to feel and touch the merchandise). This is still true – you find people in the Shanghai store that seem to sleep in the beds and sofas, those that read a book with the feet on one of the tables in the room settings, take a nap – but IKEA try to put up with this as they hope that these people will later return as customers. For example, on in-store sign portrays an older couple whose child just moved away from home to attend college.
The couple discusses how IKEA help them to convert their son’s former bedroom into a new room for their own use. The store’s room setting are full of furnishing and décor ideas for this purpose, the ad argues. The Beijing store is expected to take 20 000 visitors a day, and weekend crowds are so big that staff need to use megaphones to keep crowds in control. 20 000 a day add up to some 6 million visitors each year. To be compared with the ‘normal’ number of visitors for an IKEA’s store elsewhere which is 2 million visitors/year. As the staffing is the same as in other IKEA stores around the world there are of course consequences for the service level.
IKEA’s own CSI (Customer satisfaction index) shows that – expect for service and shopping experience – China is below the IKEA average. IKEA scores high on product range and fashion. Seeing the number of people that visit the stores in China it is no wonder satisfaction levels were down. Today overall satisfaction in China is argued to be equal to the rest of the world, despite a lower score in some areas. When it comes to inspiration, waiting times and helpfulness of staff IKEA in China scores above average. Another thing puzzling the Chinese customers about IKEA are the added labour one has to put in oneself. Besides the self service concept throughout the store, having to visit a warehouse to pick your stuff up – the customer have to assemble it at home. While you do not need many tools to do this, as China does not have a DIY culture, who has even the most common tools in their houses? When you need something done you call for someone as labour is less expensive.
To try to explain and justify the DIY concept – which is at the heart of the IKEA concept – is thus hard work in China. IKEA provides home delivery – long and short distance – as well as assembly service for a low fee (home delivery short haul for RMB 50 and assembly one piece RMB 40). IKEA has also created – not intentionally but still – an industry around itself of delivery drivers that also help assemble your IKEA furniture. These pick-up trucks with drivers are lined up outside the stores (Lewis, 2005). However, when Chinese shop at other places this is included in the price. In Europe and in the US the price is so low that the consumer can see the benefits to do things myself but here when the price of the products at IKEA are not that low and you are expected to do things yourself that no other retailer here makes you do….it is easy to see the uphill struggle.
IKEA tries to acknowledge this and provide information in the stores, on the website and in the catalogue to prepare the Chinese consumer for the IKEA store experience. They even have shopping hostesses walking around the store explaining and showing how the concept works to customers. And it is progressing, IKEA representatives argue, but slowly.
As indicated above, consumers in China are demanding when it comes to service. They are used to, if not world class service, but at least that there are people to help you with all kinds of tasks. The self service concept of IKEA and the DIY is one thing that is hard for Chinese to accept. And what about service orientation among staff in an IKEA store? This is difficult to get an indication about. IKEA uses mystery shoppers to get some information here but it is hard to say something general. If you take into account 50 years of dictatorship, state rule, state owned enterprises with little room for the individual etc – how service minded can you expect the Chinese to be? IKEA tries – here as everywhere else in the world – to implement a staff strategy that makes everybody coworkers rather than employees. This is something that ought to be contrary to the culture in a country with high power distance relationships. IKEA argue that it is improving as conversion rates – consumers visiting stores that are also buying something – are improving, and are now well above 41 %.
IKEA has another challenge that affects service and that is the fact that many products – despite increased sourcing in China – have huge lead times in terms of shipping from Europe and other sourcing markets to China. That have historically made it necessary for Chinese stores to push and sell what they got in store rather than what they do not have in store (but is in the catalogue). Due to a lot of work being work being put in to improve this – increasing domestic production, a new warehouse in China – availability in China is almost the same as for the rest of the IKEA group. IKEA in Sweden
IKEA’s first store in Sweden, the first in the world, was opened in 1959 in Älmhult, in Småland (a county in Sweden sometimes rumoured to be very barren and with people that are extremely stingy). IKEA today has 17 stores in Sweden and IKEA is a big part of home decoration in Sweden – and has been so for many years. IKEA’s statement in the business mission that they make furniture for ‘the many people’ is very true in Sweden very penetration of their products are very high, much higher than in many more markets. Accordingly, IKEA is well-known in Sweden, i.e., Swedes have knowledge about IKEA products, stores and the company, many Swedes have had IKEA furniture for generations. This is from a company perspective also a challenge, not just a good thing as IKEA becomes associated with boring furnishing styles of older generations. IKEA is still in Sweden seen as innovative with very good prices. While ‘the many people’ is an accurate description of consumers of IKEA in Sweden, in actual marketing work it is a bit smaller. It is women 20-49, often with children. In addition, an important target group in recent years has been +55 years that think they have done enough home furnishing, have no kids in the home and have a good financial situation.
Overall, the IKEA assortment is around 10 000 products that the stores can choose from. In Sweden the stores are fairly small and carry only 6-7 000 of the available products in the general assortment. While there is no adjustment made in the assortment to the Swedish market, adjustments are made to the local market by the stores (in terms of marketing and the local competition situation) who have the authority to adjust to local competition and have during the latter years received and developed more marketing initiatives than previously. Price (as a marketing tool) is central in Sweden as IKEA is known for its low price. This is done by have a low price promise and the aim is to have a low in comparison to competitors in different areas. In recent years, here as in most parts of the IKEA world, cutting prices has been a major marketing strategy, by some 20% over the last 8 years. Sourcing for all the larger and transport wise heavier and bulkier products are done in Europe (and Sweden itself is one of the larger sourcing countries for IKEA outside Asia).
Location and store formats
In Sweden IKEA stores are located as in much of the IKEA world: outside city centres, with a focus on consumers using their own cars to travel to and from IKEA stores. For IKEA, establishing an IKEA store in Sweden if fairly easy, IKEA gets many propositions from different areas and towns in Sweden wanting an IKEA store. One of the recent and much publicized openings of IKEA stores in Sweden was the store in Haparanda Tornio. Haparanda Tornio is in the far north of Sweden (on the border to Finland) and launch of the store there has been a big success not only for IKEA but for the whole community (which is an area where depopulation is a major problem). However, event though it is easy to find places to establish IKEA stores in Sweden, there is still (also for IKEA) competition about the good places to locate a store.
As mentioned above, IKEA stores in Sweden has been fairly small, in the lower rim of square meters and number of articles stored (except the big store in Kungens kurva which is the biggest IKEA store in the world). There are plans to refurbish stores and make them bigger, and new stores are always bigger than the older ones. Otherwise the format of the store follows the IKEA standard layout with parking lot outside the store and a two floor store. Some new stores, like the new store in Malmö, is planned to be build on pylons and have the car park under the store (like in Shanghai for instance). Advertising and promotion
In Sweden the catalogue is the most important promotion tool. It makes IKEA unique, is a source of inspiration and is the most important printed marketing tool IKEA has. In Sweden the launch of the new catalogue is a major thing, something that all major newspapers have lengthy reports about and that is a major PR thing. In 2008 IKEA furnished the waiting hall of Stockholm train terminal when the new catalogue was launched August 14th. IKEA Family was first launched in Sweden and was at that time one of the first loyalty cards and clubs in Sweden. Today it is still one of the bigger ones with 1,7 million members and is still a very important marketing tool for IKEA in Sweden. The web is also important for IKEA Sweden, maybe especially for new groups of customers (for example younger customers) and because it is a good way to make customers prepare for the store visit and it is also there IKEA can make accessible different planning tools like for instance the kitchen planning tool. IKEA’s approach to the Swedes in advertising and promotion is intended to be youthful and different, fun and surprising, emphasising that nothing is impossible but that the company also is very honest and human.
At the moment IKEA in Sweden is in a period of ‘re-launch’. While being well known (as IKEA is in Sweden) is often an advantage, it can also be a disadvantage. Consumers get used to the company and the rebellious attitude and image is hard to keep when penetration – in many age groups – is very high. Compared to many other IKEA countries, IKEA in Sweden is in another part of the IKEA lifecycle where consumers have homes filled with IKEA furniture and accessories, IKEA is the market leader for kitchen in Sweden etc. How do IKEA make the Swedes still find it exiting and new? The line for 2008 is ‘Decorate the home as you want to live’ and ‘Long live diversity’.
Examples of IKEA address Swedish customers is a campaign that is a few years old and went from the fact that in IKEA target group there are a lot of divorced parents that share custody of children. So the campaign focused on how IKEA contributed to the slogan ’Better divorce for everybody’. IKEA has also focused on campaigns which points to the diversity of the Swedes in terms of ethnicity, showing different ethnic groups in Sweden as customers. One of the more well known and longest running campaigns is the one with the slogan ‘Not for the rich but for the wise’ emphasising that IKEA has high quality for low prices and that wise customers realize that. The selling environment and service
The stores are the main marketing tool of IKEA in Sweden, this is where the customer come and this is where they can see what it is all about. As indicated above, IKEA stores have been fairly small in Sweden which has meant that it in many places has been difficult to expose and show the width and depth of the assortment IKEA actually has. Increasingly new and bigger stores are built to allow for showing the customer more of the IKEA product range.
The stores in Sweden are set up in a fairly standard way. The common store planning which is the IKEA store planning blue print is used as a starting point – but that then meets the actual or planned store which makes for adjustments in the standard layout. As in all IKEA countries, the furniture part of an IKEA store (the room settings on the 2nd floor of the store) is always opened by 5 rooms that are the same all over the world – but these are also adjusted locally to see what the local markets can do with this. While the stores are to some extent set up the same way, local adjustments are made to the normal room-size of a living room or a bed room of the country market, the interior of the kitchen etc etc. A Swedish IKEA store for instance have often kitchen room settings 16
with what is called a kitchen island (part of the kitchen is a stand alone part integrating cooking, washing up and eating places in the kitchen) and walk in closets. To Swedes the DIY concept of IKEA (and DIY in general) is an accepted concept: you collect your flatpacs, carry them home, assemble and you pay a lower price. Still, in recent years IKEA in Sweden have added services concerning home delivery and assembly service at a cost for customers that want this.
When it comes to the Customer Satisfaction Index (CSI) that all markets in IKEA do regularly central factors are waiting time and product in stock, which is something that IKEA Sweden has worked with a lot and have improved in recent years. This also indicates that one major problem in IKEA stores in Sweden has been queues in stores and out of stock of products. IKEA still get high points from Swedes on innovativeness and the low price level.
IKEA in the UK
IKEA has a fairly long history in the UK, having entered the market in 1987 and now has 17 stores in the UK. Expansion plans include a further 7 stores in the near future. The UK is one of IKEA’s major markets, the second to third one in size after Germany and the USA. The current CEO for IKEA, Anders Dahlvig, was the country mananger during much of the 1990-ies when a relaunch and repositioning of the brand in the UK took place. The target group is mainly women in families aged 25-45 and middle-class. This then varies with different products and product groups. Merchandise
Overall the assortment in UK stores are not different from anywhere else in the IKEA world. The beds sold at IKEA are bigger than the normal UK size but that is something that IKEA tries to make a point of (so no adjustment has been made here). Adjustment of electrical products are, of course, made but in general there is no adjustment in the merchandise sold in the UK. All the normal supply chain is used and larger products are sourced in Europe while accessories are sourced in other parts of the world. IKEA in the UK also has a low price image and promise to the consumer, this is very important in the marketing: low prices but good quality. In recent years, as elsewhere in the IKEA world, one of the premier marketing focuses has been on cutting prices. Allegedly prices has been cut by more than 20% over the last 8 years. Location and store formats
The fact that the UK has 17 stores and around 60 million inhabitants, Sweden has 17 stores and 9 million inhabitants tells us that UK retail planning laws are very strict and difficult for big block out of town retailers like IKEA. The lack of new established stores has been a major concern for IKEA UK for many years and that also forced some new thinking concerning the layout of an IKEA store. Normally it would be big parking space and two stores but starting in the UK, IKEA has started thinking differently on how an IKEA store is set up. This has lead to an adjusted concept store in Coventry with three levels and a closer to city centre location. Whether that is now the solution for IKEA UK to set up more stores or not is not clear. Most of the stores in the UK are set up the standard way and has an
out of town location, encouraging customers to use their own cars to access the store.
Advertising and promotion
Also for IKEA UK the IKEA catalogue dominates marketing efforts. While now 70% of the marketing budget, efforts are made to lower that as it is believed that it is very expensive to distribute in high population markets like the UK and it is also no longer as effective a marketing tool as is once was.
One of the most noticeable things about IKEA in the UK is the daring and challenging approach that has been used through the years. The IKEA and St Luke’s campaign ‘Chuck out the Chintz’ from 1996 is famous (even Tony Blair referred to it) as is the ‘Stop Being So English’ campaign. In the UK IKEA as dared more than in many markets when is comes to challenging the market and its customers. The preferred approach is being different – but do it in a way that connects to the fact that IKEA sells home furnishings. According to IKEA, the Brits should appreciate their homes more (and spend more time there) and IKEA can help with low prices, good products and design and the fact that IKEA has 65 years of experience in home decoration. The launch if IKEA UK in Scotland is a good example of adjusting to the local market while sticking to the mail IKEA ‘be different’ message. The campaign focus on two very hard looking Glasgow guys – that go soft with soft pillows and green plants from IKEA.
The web is very useful in the UK, as the stores are only 17 and there is a need for information on availability on products and to prepare the store visit IKEA family was launched in 2007, and is reported as very successful also in the UK. However, compared to the British grocery retailer Tesco who runs probably the worlds most successful (in many aspects) loyalty card, IKEA has a long way to go before the IKEA Family loyalty club generates as
many advantages as Tesco’s club does. The selling environment and service
UK customers are said to be demanding and does not mind airing their problems and IKEA Still, Brits generally live in the houses that they own and are not alien to the DIY concept, even though the IKEA DIY is somewhat extended compared to the original meaning of DIY. Here, as in Sweden, services offering to take out some of the DIY parts have been (home delivery and assembly service at a cost).
UK has struggled with some things that relate to selling environment and service. It all comes back to having only 17 stores and being 60 million people and IKEA UK being one of IKEA’s biggest markets – i.e., IKEA is very popular in the UK and that leads to problems that can be seen in the IKEA CSI. Access to stores and products out of stocks are areas of concern as customers say that it is difficult and time consuming to get to the stores – and they also often run the risk of not being able to take the products home with them from the stores as they are out of stock. This is of course things that are acted upon, through the long range work to establish more stores to planning of personnel in the stores (which is difficult in itself with a fairly large personnel turnover in the UK). Still it 18
is a major concern, making this area of the marketing effort a challenge. The Brits are satisfied with the prices that they feel are low for the quality that the customer get. Summing up IKEA in China, Sweden and the UK
In figure 1 we attempt to compare IKEA in China, Sweden and UK. For comparison there is also a more ‘general’ picture of IKEA in the world. The comparison is done for the four different dimensions of retailer marketing strategies that we have investigated. As the comparison is done on a general level it lacks detail but is even so considered to give a good overall picture of how the different countries relate to each other on the different dimensions.
Summary and conclusions
In the case of China it is clear that IKEA have had to adjust and work harder with some its basic principles than on other markets around the world (maybe Eastern Europe and Russia being the exception), certainly than in Sweden and the UK. Low prices are one of the cornerstones of the IKEA concept. In China IKEA have had to drop some of its basic principles – centralised sourcing and supply chain – to be able to develop its business in China. Prices were too high and are coming down in a rate the demonstrate how wrong the prices were – for the Chinese market – to start with. Also in the case of location and communication (advertising and promotion) we can see adjustments to the characteristics of the Chinese market that are larger than on other markets. Here the special situation in the UK with retail planning laws have forced IKEA to innovate – and adjust – its basic store placement and format to fit regulations in those markets.
Here it also seems like Sweden is following with plans to set up new stores (sometimes) in a different way. The adjustments to local humour and preferences is clear when it comes to advertisements, where the approach in China seems ‘softer’ and less provocative than is the case for Sweden and the UK, but in relative terms it may be as provocative. Sweden is a special case as IKEA has been present there for so long, leading to – within a standardised frame of communication – communication that builds on peoples familiarity with the brand. The selling environment and service levels have not been changed in China, Sweden and the UK compared to other places to a large extent. It seems like innovation to fit the Chinese consumer – offering home delivery, assembling service etc – was invented here from necessity and then spread to other markets like Sweden and the UK.
From IKEA’s perspective, China has been a real trial of the business concept. To some extent the jury is still out on whether or not it is a success but from IKEA’s point of view the ‘worst’ part of the China experience is over. IKEA have learnt many things in China and many of these lessons will be useful in other markets around the world. One lesson for IKEA – according to senior managers at IKEA – is the fact that it has not been able – in order to succeed on the Chinese market – to rigidly cling to the marketing strategies that on other markets have meant success and meant working towards the 19
business concept. While keeping tight some areas – assortment, brand name, overall communication, store concept etc – IKEA has been able (and forced to) adjust some other parts to be relevant on the market. Without adjusting prices radically and changing sourcing and changing main communication (not catalogue), it might have been another story. From IKEA’s point of view the lesson might also have been that it is not critical that it can not achieve the same results with the same tools on all markets. Adjustments have to be made on alien markets like the Chinese. But as the Chinese market experience shows: adjustments can be made and still be true to the overall business concept (as some of important pillars of the IKEA concept have not been changes, just the ways of achieving them).
While IKEA in China is about introducing a business concept that is – to some parts at least – different to what customers are used, IKEA in Sweden and the UK have different situations. Swedes have 50 years of experience of the IKEA concept and the risk is always that it gets boring and something that is seen as old-fashioned, if the innovativeness is not continued. And that innovativeness is something that – for a standardised retailer – needs to be found within the business concept somehow. Brits have 20 years of experience of IKEA so the challenge is also here to continue to be innovative while being more and more of the establishment so to speak. However, in the UK there is still much less penetration of the concept than in Sweden so the marketing strategy work is somewhat different.
From a general retail standardisation and adaptation point of view, the IKEA case shows that it is possible to work a fairly standardised concept also on markets that are very different from the ones were the business concept have originated from. However, the case also shows that there are limits to how far you can go in standardisation. In the IKEA case it is clear that to some extent they need to adapt in order to be true to their business concept. This also means that it may be more interesting to focus on whether or not companies are true to their business concept than if the are using the same marketing strategies all over the world. It is the business concept that is exported and in order for that to be the same all over the world, marketing strategies sometimes need to be adopted rather than standardised.
Cite this essay
IKEA in China, Sweden and the UK. (2016, Mar 28). Retrieved from https://studymoose.com/ikea-in-china-sweden-and-the-uk-essay