IKEA price advantage Chinese failure cuts can rescue?

IKEA and China contact long-standing, in the early 70's, IKEA already in the Chinese buying cheap products (see Chinese version of the magazine in 2002 3 "IKEA in Chinese happy life"). Since 1998 IKEA retail store into the China, recognized the IKEA brand gradually in large and medium-sized city in young people. The first annual sales reached 201000000 yuan, 568000000 last year, the growth rate is not low.

But IKEA in China expansion is still cautious: in April 16th this year has been to, they can according to the global standard of opening a real branch. Prior to this, add up to IKEA in Shanghai and Beijing area is not store large store (33000 square meters).

In IKEA global president Anders; Dyer Ludwig's eyes, China at present is not the most important market, because Chinese consumers still think IKEA in the high-end products, this is bad news for always rely on small profits but quick victory for IKEA. Anders said, "although the consensus view that the Chinese consumption ability is rising at an alarming rate, and USA consumption ability in the drop, but IKEA in USA every store sales are much larger than China."

In Chinese, Russia and other countries, IKEA by local consumers as in the high-end products, Chinese middle class and even believe that consumer IKEA product is advertised as the identity of the way. IKEA became so numerous Chinese "be good to hear or see" place -- although every passenger, but customers are not many, the unit cost of income generated than in Europe and the United States is much lower. Because too IKEA prices high, often in the IKEA shop "imitator" haunt. These customers with a camera, even with the decoration workers to IKEA to volume size, see style. They believe, even if please workers to produce a piece of furniture in the home, also compared to order a IKEA in mass production factories in many furniture cheap -- IKEA price advantage in the Chinese failure.

Low price to win IKEA encountered more severe price killer in China. Let IKEA difficult to imagine, a IKEA seems to limit in the furniture has been low, in the same city other furniture market, would have similar appearance to half the price of products! Look, a substantial price reduction is IKEA into China market after the important strategy, last year, IKEA started since it entered the China largest price -- in 2002, more than 500 kinds of IKEA products price decreased by 20%. It is understood, IKEA store commodity prices than in the past a lot of low.

But the price strategy IKEA still faces difficulties -- they obviously can't accept China many artisanal furniture manufacturers cost saving process -- with workshop manual production instead of the standard unified big machine production, with slightly rough process, don't even consider environmental factors, these beautiful appearance but no intellectual property rights of the furniture, of course the price is much lower than IKEA. The America often rejected products but it is Chinese consumers most loved -- because in China, main consumption crowd is mostly not much money but love fashion, young people, as long as the good-looking style, with the basic functions, they don't expect a sofa quality to can last 10 years 20 years, certainly not in such excess quality requirements to take more money.

"In order to reduce the price, our most important task is to increase in Chinese local procurement." Anders; Dyer Vig President said. At present, most of the furniture is not IKEA in China procurement. In addition to the reasons of wood resources, the more important factor is, IKEA can not accept Chinese generally adopt the production Handmade way -- because IKEA furniture furniture are disassembled flat packaging, by the customer back after his installation, so the size of each component must be done very standard, and Chinese furniture production the enterprise is in the factory when assembling, debugging for the customer, not the standard parts can constantly revise manually, so the production process is not very high, the factory will not have to spend money to buy the production machine processing standard size furniture parts expensive -- after all, China labor is much cheaper than the machine.

Because of China supplier can't meet the IKEA standard, therefore, most wooden furniture this want to price to win the Home Furnishing supplies business in China sell are ordered from northern factories, and expensive freight transported to the Chinese.

Perhaps it is because of the difference between let IKEA and Chinese market is still a considerable distance. Therefore, this home in the emerging market with rich operational experience of the Nordic companies started a new adjustment.
The location of the first standard shop reflects this change -- ever built in the suburbs election IKEA opened in Shanghai this standard store elects in the bustling Xujiahui commercial area beside. Their explanation is, because most China consumers no private cars. In addition, because most consumers need delivery, IKEA is also equipped with delivery vehicles more, reduce shipping costs. In only two stores, people rising spending power of the Chinese, IKEA envisages an annual newly opened two stores. In several dozens of stores American, IKEA but will continue with annual the rate of expansion of 5 new stores. Dyer Wenger certainly clear "different potential market" and "the biggest market", what he is doing now is as soon as possible to narrow the distance between.