Huge population and growing middle class fuel the demand for furniture in China. One of the biggest furniture companies in the world is the Swedish brand IKEA. Lately, IKEA invested RMB 10 bn in China in e-commerce and digitalization. The investment paid off since IKEA’s online sales increased by over 70% in 2021. How did IKEA make it big in China?
The furniture market in China
The furniture market in China is extremely lucrative. In 2021, the production output in China reached 910 million pieces of furniture. Aside from mass-produced furniture, custom-made furniture is also on the rise in China. Since the three-child policy was introduced, the demand for children’s furniture has picked up.
On the one hand, the Chinese cherish domestic brands that produce furniture which reflects Chinese heritage. On the other hand, Chinese consumers are aware of the environmental impacts and materials used in furniture production. Hence, they opt for “green manufacturing;” the design falls in second place. IKEA, with its sustainable practices, is well-welcomed in China. Aside from that, IKEA’s minimalistic design appeal to IKEA’s key customer group in China, the younger consumers.
IKEA in China
IKEA has about 460 stores in 63 countries. The company has been in China since 1998. Over the years, IKEA opened 37 stores in China, and the only cases of closure happened in April 2022 in Guizhou and in July 2022 in Shanghai. Jiangsu has the highest number of stores – five. Shanghai and Guangdong have four stores per region, Beijing and Zhejiang province have three. In most cases, the stores are located in suburban areas, so customers can get there using public transportation.
IKEA stores in China
- Beijing Siyuanqiao Store
- Beijing Xihongmen Store
- Beijing Wukesong Experience Centre
- Chongqing Store
- Fuzhou store
- Foshan Store
- Guangzhou Tianhe Store
- Guangzhou Panyu Store
- Shenzhen Store
- Harbin Store
- Zhengzhou Store
- Wuhan Store
- Changsha Store
- Nanjing Store
- Nantong Store
- Suzhou Store
- Wuxi Store
- Xuzhou Store
- Dalian Store
- Shenyang Store
- Xi’an Store
- Jinan Store
- Qingdao Store
- Shanghai Baoshan Store
- Shanghai Xuhui Store
- Shanghai Beicai Store
- Shanghai Jing’an Store
- Chengdu Chenghua Store
- Chengdu Gaoxin Store
- Tianjin Dongli Store
- Tianjin Zhongbei Store
- Kunming Store
- Hangzhou Store
- Ningbo Store
- Wenzhou Experience Centre
Does IKEA manufacture in China?
IKEA furniture is mainly designed in Sweden but mostly made in China. IKEA sources from 55 markets and has about 1,600 suppliers (1,000 supply home products). Chinese suppliers manufacture over 22% of IKEA’s products. Manufacturing of IKEA products also takes place in neighboring countries like Vietnam and Myanmar. The company plans to move production to Turkey to avoid problems with disrupted global supply chains.
To become an IKEA supplier, the company has to follow the IKEA supplier code of conduct IWAY. IWAY is a total sustainability management system. It sets clear expectations and ways of working for environmental, social, and working conditions, as well as animal welfare. IKEA suppliers and service providers are required to follow the code. It is in line with environmentally conscious Chinese consumers.
IKEA’s approach to consumers in China
The company focused on cultivating an omnichannel customer experience. It employs social media like microblogging on Sina Weibo (WeChat) and word-of-mouth marketing to increase its presence. Moreover, the company deals with complaints on its Chinese social media accounts. Frequent communication with the audience increases the company’s likability.
IKEA’s online shopping service is available in about 300 cities in China. China’s first mini-IKEA store, “IKEA City” in Shanghai, Jing district, has 3,500 products on display and 6,000 online. The store experience is tailored to customers living fast-paced lives in big cities in China. While IKEA’s online sales increased by 74%, store sales fell by 8% in 2021. It shows the power of the company’s online presence.
IKEA’s business in China is driven by:
- mini-WeChat program
- IKEA’s website available in Chinese and English
- mobile applications
- flagship online store on Tmall
- 35 brick-and-mortar stores in major locations and cafeterias with localized dishes
- concept stores.
Even though IKEA is a latecomer to e-commerce, it is relatively successful in China. A week after the opening of IKEA’s flagship online store on Tmall, which is owned by Alibaba Group, the number of orders reached 1 million. Moreover, during the “Double 11” in 2018, one-day sales reached 12 billion yuan, a year-on-year increase of 270%.
Other things about IKEA in China
What about the price of IKEA’s products in China? Overall, it is lower than, for example, in the US. It is possible since the production mainly takes place at Chinese factories. An imported IKEA table could have cost 120 yuan, but since it is manufactured domestically, it costs only 49 yuan.
Did you know that the Chinese like to test products in IKEA’s showrooms like no other nation? A Chinese person taking a nap on the displayed bed or in an armchair after or even during shopping is a common sight. Such behavior is not frowned upon in Chinese IKEA but is prohibited outside China. Instead of fighting it, IKEA accepted the phenomenon, explaining that customers are more likely to purchase the furniture after testing it.
Moreover, IKEA plans to renovate its stores in China, abandoning the guided path and allowing customers to explore the space freely. Renewed stores will have spaces for social interaction, like knowledge-sharing and workshop areas.
IKEA’s collaboration with Chinese companies
Alibaba Group is not the only company that helps strengthen IKEA’s presence in China. IKEA and Xiaomi teamed up to make smart home appliances. The strategic alliance brought to life smart lighting devices and a table with a built-in Qi charger. It was the first time IKEA partnered with a Chinese technology company to create products.
Want to make it big in China like IKEA? See how to export to China.