IKEA will add more smaller outlets across China, as the furniture giant known for sprawling big-box stores experiments with more accessible retail formats amid an economic slowdown and surging local competition.
“We have learned a lot about how to meet customers,” Sara Del Fabbro, deputy retail manager of Ingka Group, Ikea’s largest franchisee, said. “Even if the wallets are smaller, the needs of people are the same and life at home is important.”
She did not elaborate on specific plans or a timetable for the new outlets.
Ikea began testing smaller formats in the cities of Xi’an and Shenzhen earlier this year. Shenzhen’s store has been designated a Plan and Order Point, which offers customers one-on-one advice on how to plan more complex orders, such as kitchens, before choosing home delivery or heading to a nearby collection point. At 300 square metres, the outlet is about one-tenth the size of Ikea’s sprawling traditional stores.
Foreign and domestic retailers have been pummelled in China as consumers pull back, with a years-long property market crisis in the world’s second-largest economy further hitting demand for furniture. Nationwide sales from building material and home furnishing stores fell 5.8 per cent in the first seven months of this year, data from the China Building Materials Circulation Association show.
Ikea’s China growth has slowed in recent years as local rivals – many of whom offer customisation services to fit out entire houses – surge. The biggest include Red Star Macalline Group and Easyhome New Retail Group, who are years ahead of Ikea in building an online presence and reaching a wider range of customers. Japanese furniture retailer Nitori Holdings offers a wider range of products, and has been expanding quickly in China. A sea of small domestic furniture sellers also pose a threat, offering dirt-cheap options via e-commerce platforms such as PDD Holdings’s Pinduoduo.
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“The China market is really a market where competition is fierce,” Del Fabbro said.
Thinking small
Ikea entered China in 1998 and operates dozens of furniture outlets in the country. Now, like other foreign giants, it’s working to adapt to the more crowded, cautious China retail landscape. In 2023, it announced a 6.3 billion yuan (S$1.2 billion) investment in China over the following three years to open new stores and improve logistics, and has pledged more than 650 million yuan to bring hundreds of lower-priced products to its mainland stores.
The company will boost its digital presence, Del Fabbro said, in a country where shopping is dominated by e-commerce. Ikea currently has an official store on Tmall, Alibaba Group Holding’s dominant online marketplace, and sells through Tencent Holdings’s WeChat and its own app.
The changes come as the flat-pack giant is also making changes in other parts of the world as consumers become increasingly price aware. Focusing on smaller formats is a global strategy, including a new smaller store that opened in a Paris shopping mall this month.
Ikea is looking at 10 to 20 per cent price reductions for key products sold in South Korea, and has lowered prices on nearly 1,000 products in the US and hundreds at home in Sweden. It’s also trialling an online marketplace Ikea Preowned in some European cities, where customers buy and sell pre-owned items made by the retailer. BLOOMBERG
