An internationally renowned home furnishing brand, once swept the world, after decades of glorious history. But when it entered the Chinese market, it fell into an unprecedented predicament. What has IKEA experienced in China? How will it transform to re-engage Chinese consumers? Let's take a look at this challenging topic.
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IKEA's dilemma in the Chinese market and its transformation path
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IKEA's growth in China has been a rollercoaster ride. When it entered the Chinese market in 1998, it instantly captured the hearts of countless urban white-collar workers with its unique experiential shopping and warehouse-style home furnishing concept. Visiting IKEA, tasting Häagen-Dazs, and drinking Starbucks became the standard lifestyle of petty bourgeois youth at that time. The heat didn't last long.
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At IKEA, 10 years have passed since the "honeymoon period" with Chinese consumers. After the novelty of home furnishing products faded, IKEA furniture began to lose its competitiveness in terms of price and design. Well-known local stores such as Red Star Macalline and Actually Home are gradually rising, and affordable products labeled as "IKEA style" are emerging on the Internet. The IKEA deity loses its appeal due to its high price.
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IKEA has been slow to respond to the penetration of e-commerce in the Internet age. When Easyhome and Red Star Macalline began to deploy online business as early as 2013, IKEA did not launch an online store until the second half of 2018. In the years since the e-commerce bonus period, IKEA has lost countless sales opportunities.
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Offline business is just as tough. The once popular IKEA hypermarket has been criticized for its "labyrinthine" shopping routes, which have brought consumers a very poor shopping experience. Its small ordering store PUP model also died due to a lack of flexibility. IKEA's urban experience store opened at the intersection of Jing'an Temple in Shanghai was forced to close after less than three years, although it was mainly small items, and the sales conversion efficiency was much lower than expected.
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Just as IKEA had to shrink its footprint in China, closing and withdrawing from its second store in Shanghai. This is the first time IKEA has closed a store in China in its 26 years of existence, reflecting the dilemma of the company in the Chinese market.
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Faced with the risk of becoming marginalized, IKEA tried a series of salvage measures. Since August last year, IKEA has repeatedly cut prices in the Chinese market, and announced that it will adhere to the low-price strategy for a long time, trying to create a "home version of Uniqlo". When the world's first brand boutique was opened in Shanghai, it was even more straightforward to play the sign of "budget-conscious". In terms of restaurants, IKEA has launched a "poor ghost package" as low as 9.9 yuan, and frequently offers discounts.
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But with a low price strategy alone, it is difficult to completely reverse the decline of IKEA. For Chinese consumers, who are accustomed to "high quality and high price", they not only want low prices, but also pay more attention to the actual cost performance of products. Blindly chasing low prices is tantamount to self-cutting.
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IKEA is under tremendous pressure to transform. It must reshape the brand image in the minds of consumers and break through the traditional business model in order to regain a foothold in the highly competitive Chinese home furnishing market.
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It's time to learn from those new players. In the past, IKEA's old rival - IKEA, created new products such as "Internet celebrity models" that closely followed the trend of young people, and highly digitally talked to young people. Later, there was the emerging unicorn brand Dustworm, which achieved the ultimate in furniture personalization and product independent design, and gained a large number of die-hard fans. These brands are all striving to achieve youth, digitalization and differentiation, in order to break through the homogeneous pattern of the home furnishing industry.
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The transition to IKEA has been difficult, but it's time to do so. Perhaps it can make more efforts in product design, channel expansion, brand marketing, etc., to keep pace with the times and meet the new consumption needs of the young generation in China. With a new attitude and unique consumption experience, it will recapture the hearts and minds of Chinese consumers.
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