Ikea Hits Home in China
The Swedish Design Giant,
Unlike Other Retailers,
Slashes Prices for the Chinese
BEIJING -- 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 the 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 nonsale item 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.
Although China boasts the world's fastest-growing economy as millions join the ranks of the middle class, the Chinese are famous for their reluctance to spend their money, saving on average 30% of their income, one of the highest savings rates in the world.
By increasingly stocking Ikea's Chinese shops with China-made products, Mr. Duffy pushed prices on some items as low as 70% below prices in Ikea outlets outside China. For example, an Ikea's single-seat Ektorp armchair retails for $112 in China, 67% cheaper than one sold in the U.S.
The gamble seems to have worked. Next month, Ikea will up the ante in its low-price strategy by opening a store in Beijing that will be its largest store in the world outside of its flagship store in Stockholm. The big boxy building in Ikea's traditional blue and yellow colors will be roughly 42,000 square meters, or close to the size of eight football fields, only about 20% smaller than Ikea's Stockholm store.
The Beijing behemoth is meant to cater to large volumes. Ikea expects to sell enough furniture to fill about 5,000 40-foot containers in the store each year, double what it sells in other stores. Weekend crowds at Ikea's three other Chinese stores are already so big -- more than 20,000 customers a day -- that employees need to use megaphones to keep them in control.
Though no stranger to large crowds, Ikea is expecting even more people will flock to its new Beijing store. To accommodate them, its building aisles are half a meter wider than normal. The store is expected to draw six million visitors annually, compared to two million for Ikea outlets elsewhere.
Ikea -- whose name in Chinese, "Yi Jia," means "comfortable home" -- is anything but comfortable on weekends, as thousands of Chinese crowd in to find goods to outfit their new homes and apartments. Over the past eight years China has seen a huge surge in homeownership as Chinese authorities have done away with state-allocated housing and subsidized rentals. Since many apartments are typically empty shells sold without paint, lighting or even flooring -- a practice called "mao pi," or semi-furnished -- the market for home furnishings has taken off.
In cutting prices so deeply, Ikea is bucking the trend. Typically, Western brands in China price products such as makeup and running shoes 20% to 30% higher than in their other markets. That's partly to make up for China's high import taxes on foreign goods and partly to lend their products an added cachet in Chinese eyes, an important branding strategy in developing markets.
Ann Chen, retail analyst at Bain & Co., a Boston-based consultancy group, says foreign retailers in China "don't feel that they have to compete on price," because they are offering a wider selection of goods and a more pleasant shopping experience than domestic competitors.
Mr. Duffy has a different take. "I had to make a break, change [Chinese] perceptions that Western-branded goods are normally more expensive."
Ikea's new store in Beijing, opening next month, will be the size of eight football fields.
That approach may be giving Ikea a boost. Bain & Co. estimates that the do-it-yourself market in China -- stretching beyond furniture to include things like bathroom fixtures as well as gardening tools -- is growing 10% a year and is worth $15 billion in sales. In China's home-wares segment alone, Ikea holds 43% market share, Bain estimates.
But Ikea is about to get a lot more company. Until last year, Chinese regulations required all foreign retailers to have a local partner. Ikea's first two stores in China were joint ventures. But last October, Ikea opened its first wholly owned store in Guangzhou, setting the trend for all future stores, Mr. Duffy said.
With the change in regulations, United Kingdom-based home-improvement shop B&Q has announced plans to more than double its current number of stores to 100 over the next five years. Home Depot Inc. is also said to be considering entry, and, according to some media reports, the company is considering buying a stake in local player Orient Home, which has 22 stores around China. Other foreign entrants are expected to follow.
Some analysts question whether Ikea can maintain its cut-price strategy as it plunges into China's secondary cities, where incomes are lower and demand for bargains is even higher. Ikea plans to open a store in the city of Chengdu later this year, and add about two stores yearly until about 2010. The pace is swift compared with Ikea's first seven years in China, where it kept to just two stores, one in Shanghai and the other in Beijing.
"It's a big test for us," says Mr. Duffy, who nonetheless says that Ikea will reduce prices each year by improving productivity in stores, increasing its China manufacturing facilities (it is currently building a factory in the Northeastern city of Dahlian) and sticking to wholly owned stores.
Half of the products in Ikea's Chinese stores are made in China, compared with about 23% in Ikea stores overall, with the rest made in places such as Poland and Sweden. That has enabled the company to halve prices in China over the past four years, even as Chinese consumer incomes have increased.
The success of Ikea and other Western retailers in China has wider implications: China's trading partners in Europe and the U.S. hope to reduce their huge trade deficits by getting the Chinese to buy more of their products. But that's not easy when plenty of foreign retailers in China have yet to see profits from country sales, say analysts.
The Swedish company isn't publicly listed and doesn't disclose profitability, but analysts estimate Ikea's China operations bring in about $120 million in turnover yearly. Mr. Duffy, 48 years old, a law-school graduate who long ago eschewed pinstripes for the jeans-wearing, everyman ethos at Ikea, said China operations are on track to achieve profitability, but declined to say when.
Judging by the crowds, Ikea's attempt to appeal to Chinese tastes while sticking to its signature Swedish style is working. Ikea cafeteria menus in China, in addition to the company's trademark meatballs and lingonberry juice, feature rice and braised spiced pig trotters. It offers a few products -- not many -- made just for Chinese stores, such as a 12-cent red placemat with doggy figures, a nod to this Lunar Year of the Dog.
Ikea's throwaway chic is helping convert the habits of a thrifty nation used to durable Chinese wooden furniture. Example: Chen Wei, 40, who recently brought his wife and mother to the existing Ikea store in Beijing's Madian district. "My parents' furniture used to last more than 10 years, but now they change every three or four years," Mr. Chen says.
Mr. Duffy has seen plenty of shoppers in his 19 years at Ikea. "Chinese consumers are the most demanding in the world," he says. He appears undaunted. Standing by the plastic-shrouded products in his cavernous new store, he says, "People like what we've got. We've had seven years to build a following in the city and in that time, we've learned enormously."
宜家低价策略抢得中国市场
杜福延(Ian Duffy)四年前在宜家(Ikea)中国区走马上任时，经常站在收银台旁观察消费者：不过当时来宜家购物的人并不多。
然而来宜家北京店占便宜的人却不少──吸收新的设计理念、免费享用空调和干净的卫生间。剽窃宜家设计的商品在旁边的商店就可以买到，而且价格很低，这简直是往宜家的伤口上再撒一把盐。
于是为了吸引消费者，杜福延推出了可能是宜家全球各地商场中最廉价的商品：售价1元（合12美分）的香草冰淇淋。
从此宜家开始通过大幅降价──降至全球最低价，这和许多西方零售商的做法背道而驰──来吸引挑剔的中国消费者。
虽然中国是世界上经济发展最快的国家，成百上千万的中国人也已跨入了中产阶级的行列，不过他们勤俭持家、谨慎消费的品质尽人皆知。中国人平均将收入的30%用于储蓄，这个储蓄比例居全球前列。
中国的贸易伙伴，如美国和欧洲，希望中国人购买更多的外国商品，以此缩小它们对中国巨大的贸易逆差。不过在中国，西方国家的商品一般比市场价格高出20%至30%。这一方面是为了弥补中国对外国商品征收的高额进口税，另一方面，也是为了令中国人对外国商品刮目相看──在发展中国家市场这是一个重要的品牌策略。
顾问公司Bain & Co.的零售业分析师Ann Chen说，在中国的外国零售商“不认为他们应该占有价格优势，”因为他们提供的商品种类更多，购物环境也优于国内竞争者。
不过杜福延不这么想。“我要打破这种想法，转变中国人认为西方商品通常价格更高的观念。”宜家中国店里的中国产商品越来越多，杜福延对某些商品的降价幅度高达70%。宜家颇受欢迎Erktorp系列扶手椅的零售价格在中国仅为112美元，比美国同种商品的价格低了67%。
杜福延的这次赌博似乎取得了成功。“宜家”的中文含义是“舒适的家”，不过周末的宜家店里绝对称不上舒适：成千上万人涌入商店，他们不单单是看看而已，还要为新居购置物品。位于北京、上海和广州的三处宜家店──在周末常常人满为患，周末每日客流量超过2万人，店员需要使用高音喇叭疏导客流。
宜家下个月将加大筹码，在北京开设营业面积达42,000平米的商店，其面积仅次于宜家位于斯德哥尔摩的旗舰店。为了便于疏导客流，宜家加宽了这家商店的过道。宜家预计该店每年销售的家俱足以装满5千个40英尺的集装箱──这是其他宜家店销量的两倍。
中国市场发展迅猛。由于中国废除了分配住房和租房补贴制度，买房者的数量在过去8年中迅速增加。由于许多房屋售出时四壁空空，没有粉刷墙面、安装照明设施甚至连地板也没有，中国的家装市场开始兴旺起来。
Bain & Co.预计中国的个人家装市场──从家俱到浴盆、水池和园艺工具等等──每年将扩大10%，年销售额可达150亿美元。
宜家的价格策略也鼓励了顾客重复购买。节俭的中国人喜欢使用耐用的木制家俱，不过这个习惯正在发生改变。40岁的陈伟（音）最近带妻子和母亲逛北京宜家店，他说，“我父母的家俱过去要用十年以上，现在三、四年就换了。”他还补充说，“没必要用旧东西。”此时他的母亲正在样板间的沙发上打盹。
不过他的母亲对宜家的降价深感懊悔：2004年她花2,900元（约合360美元）买了一个沙发，而如今价格降到了1,799元。她叹了口气说，“我后悔没有再等等。”
Bain & Co.预计，宜家现在占有中国家庭用品市场的43%。不过越来越多的公司马上将涌入中国。去年以前，中国政府要求所有外国零售商必须有中国合作伙伴。而如今随著这项政策的改变，英国Kingfisher PLC旗下的家装公司B&Q PLC宣布，未来五年将在中国开设100家连锁店，这比现有连锁店的数量增加了一倍以上。
在新政策下，宜家也在加紧扩张。宜家最早的两家中国店是合资经营的。不过去年10月，宜家在广州开设了首家全资商店，杜福延说以后将沿用这个开店模式。宜家计划今年在中国成都开店，在2010年以前每年增开约两家商店。
随著宜家向中小城市的扩张，有分析师质疑宜家能否继续保持降价策略，因为中国中小城市居民的收入偏低，对降价的幅度也要求更高。
杜福延承认，“这对我们是个巨大的考验。”不过他坚持认为通过提高商场效率、在中国生产更多的商品（宜家正在中国东北城市大连建造工厂）以及坚持独立开店的原则，宜家可以继续降价。
宜家中国店里的商品有一半是中国制造的，而在全球宜家店中，中国商品只占23%，其余则由波兰和瑞典等国生产。宜家因此可以在中国消费者收入提高的情况下，在过去四年中降价销售。
分析师认为，很少有外国零售商能够依靠销售在中国获利。宜家并不公开上市，因此不公布盈利情况，不过分析师称宜家中国业务的年收入为1.2亿美元。杜福延说中国业务正在逐步实现盈利，不过拒绝回答何时实现。
48岁的杜福延学的是法律专业，不过很早以前他就脱下了西装，加入了穿牛仔裤、平民化的宜家公司。他说在宜家工作19年来已经见识了很多顾客。他说，“中国消费者是全世界最挑剔的。”不过至少从表面看，他并未面露难色。他站在巨大的宜家新店中，身旁摆放著成包的商品，他说，“人们喜欢我们的商品。七年之后，我们在北京建造了这家店，在这中间，我们学到了很多。”
