An offline store that has been open for less than three years suddenly announced its closure, making the market curious about IKEA’s offline strategy in the Chinese market – this is the first time that the world-renowned furniture retailer has closed its store in 24 years since entering the Chinese market.
Recently, IKEA announced that “it has decided to adjust its customer contact layout in Guiyang market from April 1, 2022, that is, at this stage, it will focus on online channels and no longer retain offline customer contacts, so as to achieve flexibility and healthy business development in the local market.”
Home furnishing IKEA has been the first shop in Chinese mainland since 1998. It has been keeping the trend of business expansion. It is still necessary to observe the closing of Guiyang stores or the strategic adjustment of its stores. On March 2, IKEA related people told the reporter of Huaxia times that “IKEA has strong confidence in the Chinese market.”
closed for the first time in China
Although IKEA closed its store in Madian, Beijing as early as 2006, it was relocated and opened a new store in Siyuanqiao, Beijing to achieve “seamless connection”. The Guiyang store planned to be closed this time is not only its only store in Guizhou Province, but also its first offline store closed in China.
The official account of IKEA China Information Center released the closing plan of Guiyang store in March 1st. It is reported that after the adjustment, local and surrounding consumers can still buy IKEA products and enjoy services through IKEA’s official website, app, IKEA tmall flagship store and IKEA wechat applet mall.
On March 2, In an interview with Huaxia times, a relevant person from IKEA said: “The decision to adjust the channel layout is based on the comprehensive evaluation and consideration of many factors. IKEA evaluated its business in Guiyang market from the perspective of Omni channel and found that compared with offline, the online business in Guiyang market showed a stronger growth trend, especially after the epidemic, consumer habits and preferences also brought a lot of online potential.”
IKEA has publicly stated that in fiscal year 2021 (the whole year up to the end of August 2021), IKEA’s online sales in Guiyang market increased by 53%. In the first half of fiscal year 2022 (from September 2021 to now), online sales in Guiyang market increased by more than 80% year-on-year. However, compared with online channels, the performance of Guiyang shopping malls lagged behind expectations and the growth trend was flat.
On March 1, Wu Daiqi, a brand management expert and CEO of Shenzhen siqisheng company, analyzed the possible reasons why IKEA closed the only store in the region for the first time, “IKEA’s closing is likely to fail to meet the performance and profit requirements of the enterprise for the store, and the floor efficiency of the store is closely related to the consumer groups and their consumption levels in the region. In fact, the price positioning of IKEA’s products is not low except for some drainage products.”
Home furnishing in the Chinese mainland market has been quite stable in the past ten years. The pace of expansion in IKEA is quite stable. Home furnishing IKEA has expanded 2 to 4 stores a year in Chinese mainland since 2012. Home furnishing Ingka Group has 34 standard stores, 1 small shopping malls, 1 City stores, 2 experience stores and 6 gathering centers in the Chinese mainland market as of now. IKEA
expansion pace encounters consumption downturn
Home furnishing IKEA has not stopped in the Chinese mainland since 2020. Home furnishing IKEA opened in Chinese mainland in Yangpu District, Shanghai, in March 2020. In July, the first city store opened near Jingan Temple in Shanghai. It is worth mentioning that Shanghai became the first city in Chinese mainland to have 5 IKEA stores. In August, IKEA Qingdao shopping mall opened; In December, IKEA Fuzhou shopping mall opened. In 2019, IKEA also opened four shopping malls in one year, located in Tianjin, Zhengzhou, Guiyang and Changsha. IKEA Guiyang shopping mall, which closed this time, opened in 2019. So far, it has been open for less than three years.
The outbreak of the global epidemic has led to pressure on the supply chain and rising raw material prices, resulting in a wave of “price rise” of household enterprises in 2021. According to media reports, in October last year, household enterprises including Oppein Home Group Inc(603833) , Easyhome New Retail Group Corporation Limited(000785) and others raised the prices of end products to cope with the performance pressure brought by the rise in raw material prices and the increase in employment costs. At the end of December, ingerca group announced that IKEA would raise its price by an average of 9% in the global market due to the increase in transportation and raw material costs. The price range of the mainland market is not consistent with the severity of the supply chain problems faced by various regions, and the price adjustment level in the Chinese mainland market is lower than the global average price increase.
Although the price increase of products will solve the urgent needs of enterprises in the short term, on the other hand, the price increase will also affect the purchase enthusiasm of consumers. According to the latest data disclosed by the Ministry of Commerce on March 1, “since the fourth quarter of last year, the downward pressure on consumption has increased. The social zero growth rate was 4.9% in October, 3.9% in November and 1.7% in December. Generally speaking, the pressure on stabilizing consumption this year is not small.”
Referring to the store opening plan in 2022, IKEA stakeholders told the Huaxia times, “at present, Hefei and Shanghai airport projects are in the plan, and they are still in the construction preparation stage.”
At present, IKEA has not announced the proportion of Wuxi Online Offline Communication Information Technology Co.Ltd(300959) business format to revenue. In an interview with our reporter, the above IKEA people only said that IKEA’s online sales have increased significantly after the optimization of sales channels. From the specific data, IKEA’s online sales in China increased by 74% year-on-year, and the number of visits of IKEA’s own online channels in the Chinese market was 230 million.
In addition, the source said that as a leading home retailer committed to providing consumers with home inspiration and solutions, offline stores are an important carrier of IKEA’s home inspiration. Online channels cover more people and provide consumers with convenient choices, Wuxi Online Offline Communication Information Technology Co.Ltd(300959) complement and support each other.
And these people also said that IKEA has strong confidence in the Chinese market. In fiscal year 2021, IKEA China’s performance growth ranked among IKEA’s top five markets in the world, and the Chinese market is also one of IKEA’s ten markets with double-digit sales growth in the world.
