IKEA, which can't sell furniture, has become a "poor ghost canteen" for young people

Snow Leopard Finance Club

2024-05-14 09:33Posted in Beijing, creators in the field of science and technology

IKEA, which can't sell furniture, has become a "poor ghost canteen" for young people

The "false prosperity" of visiting the store but not necessarily spending

Author | Liu Shuhan

Cover source | Stills from "Bouquet of Love".

IKEA, which has been in China for 26 years, has lived a life of "good shopping, not buying".

Among the consumers who come to IKEA, they buy less furniture and spend more time shopping, taking photos and spending time. Others go straight to the restaurant, finish their meal and take a walk around the huge IKEA store.

In order to get money out of their pockets, IKEA has gone to great lengths. Since August last year, IKEA has cut prices in the Chinese market several times, and announced that it will adhere to the low-price strategy for a long time and be a "home version of Uniqlo". The restaurant launched a "poor ghost set menu" as low as 9.9 yuan, and even the world's first boutique opened in Shanghai on April 9, with a "budget-conscious" sign.

Source: IKEA's official public account

Behind the continuation of the cost-effective strategy is the helplessness of IKEA's declining popularity and shrinking performance in the Chinese market. However, the low price strategy alone is not enough to convince customers who like to visit IKEA. Someone wrote on social media, "Anyway, go to IKEA and only shop and don't buy." I have to try to sit on every sofa, and I have to lie down on any bed, but I just don't buy it, and I just make a flow for IKEA. ”

This huge problem is still facing the global home furnishing giant IKEA.

The "cat-and-mouse game" where you chase me and run away

When you go to IKEA, many people may not have bought furniture, but they have probably eaten IKEA meatballs. On the IKEA official website, the words "1 billion meatballs sold a year" are prominently displayed.

19.9 yuan for 10 meatballs and 1 yuan for ice cream are IKEA's "big killers" to strengthen its brand image of high quality and low price.

Chris Spear, head chef at IKEA's foodservice operations center, once told the media that consumers have no way of knowing how much a sofa costs $599 or whether it is affordable or not. But they can be sure that IKEA offers the cheapest food within a radius of 30 kilometers. Once the connection between low-cost food and IKEA is established, the consumption mentality of "IKEA = good quality and low price" is formed.

"IKEA would love to see consumers wander around the store, eat and then walk away empty-handed. Because we believe that when you have a need to shop at home, you will naturally be inclined to spend at IKEA. Chris Spear describes IKEA's business strategy.

But in the Chinese market, this seemingly logical style of play has met with Waterloo.

IKEA is still good to visit. The mall is spacious, warm in winter and cool in summer, rich in furnishings, and there are lockers for free storage. There are sofas and beds in the exhibition area, so you can rest directly when you are tired of shopping and enjoy the "feeling of home". Solving a meal in a restaurant is not a problem, meatballs and ice cream are almost one per person.

But after eating cheap IKEA canteens, more consumers still tend to shop around and choose other brands with better value for money. At the product level, the real quality and low price are the criteria that override consumption habits.

In the minds of many Chinese consumers, IKEA is increasingly becoming a "leisure paradise" that is suitable for shopping, eating, and not buying.

In order to attract more customers to the store, IKEA has resorted to various tricks.

Since September last year, IKEA China has launched a continuous "price investment" activity, and every two or three months, it will launch a batch of low-priced goods with a price reduction of about 20%~30%. Throughout the 2024 fiscal year, IKEA plans to launch more than 500 "lower-priced" products in China, covering a variety of scenarios such as bedrooms, living rooms, and kitchens.

In public, IKEA has also repeatedly reiterated the argument that "low prices are in the DNA". In March this year, Torga Nku, president of global retail of the Ingka Group, to which IKEA belongs, said in response to media questions that the low price strategy will continue for a long time.

On April 9, IKEA's first boutique pop-up store in the world landed in Shanghai. Products such as a 9.9 yuan watering pot and a large Ressa storage basket priced at dozens of yuan are all stored in this pop-up store with a focus on "low prices", with the aim of providing consumers with "furniture items that ordinary people can afford".

Since March 15, IKEA has launched a "Crazy Friday" meal discount, with rice and cake packages only 9.9 yuan, and many products are sold at half price.

Chinese consumers want low prices, but they want more than just low prices.

IKEA has tried its best to catch up with Chinese consumers, but it has clearly not yet emerged from the cat-and-mouse game.

After 10 years of honeymoon, the novelty is gone

After opening its first Chinese store in Shanghai in 1998, IKEA had a 10-year honeymoon with Chinese consumers.

Riding the wave of consumption upgrading, IKEA, which has both a sense of design and experience, has completed the enlightenment of a group of consumers' home aesthetics. IKEA's advocacy of warehouse-style layout and experiential shopping has also brought a novel experience to Chinese consumers. For a time, visiting IKEA, eating Häagen-Dazs, and drinking Starbucks became the "standard" for petty bourgeois youth at that time.

In 2015, the sales of traditional home furnishing stores in China fell by 9.98%, but IKEA exceeded the sales scale of 10 billion yuan, and the retail sales increased by 27.9% year-on-year.

According to FY2016 data, 339 consumers visited IKEA every minute in China. In FY2017, China became IKEA's largest market outside of Europe and the United States, after Germany, the United States, France and the United Kingdom.

Source: IKEA's official WeChat public account

However, after the initial heat, in the eyes of gradually tired consumers, IKEA is not so easy to visit.

In 2019, a survey data from Caijing.com showed that 60.7% of people were dissatisfied with the design of IKEA's shopping routes, thinking that "going around and around is like a maze". Luo Yonghao once bombarded IKEA on Weibo: "IKEA is a great company, but its labyrinthine store route guidance design (in order to allow customers to take the longest route possible in order to complete more transactions) can only be described as shameless and indiscriminate."

What's more, with the rise of competitors, IKEA's inexpensive gold-lettered signboard has faded.

Offline, local brands represented by Red Star Macalline and Actually Home continue to grow. Online, there are endless substitute products labeled as "IKEA style", and IKEA's "original figure" is drowned out due to the lack of price competitiveness.

Japan's largest home furnishing chain NITORI entered China in 2014 and accelerated its development in first- and second-tier cities in the form of large shopping mall stores, with more than 70 stores by the end of 2023 and plans to open 900 stores by 2032.

In the increasingly fierce competitive environment, "the quality can't keep up, the price can't afford it", has become a complaint for many consumers about IKEA.

In fiscal 2018, IKEA's global sales increased by only 5% year-on-year, and net profit fell sharply, down more than 40% year-on-year. This year, IKEA's sales in China increased by only 9.3% year-on-year, the first time since fiscal 2011 that it fell to single digits.

In terms of the number of stores and the speed of opening stores, IKEA has also stepped out of a "wounded Zhongyong" growth curve. In 2022, IKEA closed two stores in three months, the first time in 24 years since entering the Chinese market.

After the honeymoon period is over, the magic of IKEA, which is almost the same, seems to be gone.

IKEA is lost

It's not that IKEA hasn't tried to win the hearts and minds of Chinese consumers, but it's always slow.

During the years of China's rapid e-commerce development, IKEA was still obsessed with offline hypermarkets, and it was not until 2016 that it piloted online e-commerce in Shanghai. After two more years of thinking, it was not until the second half of 2018 that IKEA officially launched its online shopping mall, expanding the coverage of online shopping to 149 cities.

In contrast, the two rising stars, Actually Home and Red Star Macalline, began to lay out online business as early as 2013. By 2018, when IKEA had just started to act, their online turnover had exceeded 10 billion yuan on the day of Double 11 alone.

In the traditional offline business, IKEA has also promoted a series of transformation plans, but the results are not satisfactory.

In 2016, IKEA opened a PUP (pick-up and order point) store in Wenzhou with an area of only 2,000 square meters. The store is located on the ground floor of the shopping mall and has just over 2,000 SKUs, which is more than 7,000 fewer than the SKUs in a standard IKEA store. A year later, IKEA opened the same PUP store in Wukesong, Beijing.

PUP stores are dominated by small items, and if they want to buy other items, especially large pieces of furniture, consumers still have to place an order through the IKEA ordering system in the store. Items are delivered from the nearest IKEA store or distribution centre, and can be picked up in store after a few days or delivered to their home.

IKEA's original idea was to combine online and offline through PUP stores, which would not only meet the online shopping needs of consumers, but also retain its own offline sales tradition.

But consumers who have been "spoiled" by domestic e-commerce do not buy it at all. Soon, due to poor management, the two PUP stores were converted into "experience centers" and became offline stores focusing on leisure shopping.

Source: IKEA's official WeChat public account

At the end of 2018, IKEA announced that it would open 30 new small stores around the world closer to the city center, and the city center store in China was located at the intersection of Jing'an Temple in Shanghai.

Due to its strategic location, the footfall of IKEA Shanghai Jing'an City Store is not small. At lunchtime on weekdays, there are almost no vacant seats in the restaurant on the 3rd floor, but the problem is that sales conversion is not very good.

For IKEA, sales of large pieces of furniture are the best way to boost sales, and small items placed around the store are just a tool to motivate consumers to buy. The Shanghai city store, which mainly focuses on small items, attracts young people who only shop but do not buy.

In 2023, IKEA closed and withdrew its City Experience Store in Shanghai's Jing'an District, which had been around for less than 3 years, and this time the attempt ended in failure.

Today, the 81-year-old international home furnishing has not gotten rid of the label of "good to shop, not to buy", and is facing great anxiety about losing Chinese consumers. On social media, it has been noticed that there seems to be fewer and fewer people even shopping at IKEA.

Source: Little Red Book

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