Ikea in China

IKEA in China: Cultivating an omnichannel home décor shopping experience

Over the years, Chinese consumers have become increasingly willing to purchase home decor as a means of improving their standard of living. Thus, IKEA in China has risen from the opportunity provided by China’s growing furniture market.

In 2020, the Swedish furniture brand made its largest investment in the PRC of RMB 10 billion for its e-commerce and digitalization development. The brand continues its mission of cultivating an omnichannel customer experience, with IKEA’s online channels receiving over 5 billion visitors in 2021. Ultimately, IKEA’s online sales increased by 73% in 2021, now accounting for 26% of total sales. We expect IKEA in the Middle Kingdom to shift even more resources into the omnichannel shopping experience and reinvent their offline shopping experience to differentiate from online shopping. The Swedish brand also leverages the use of social media and word-of-mouth marketing, which is highly important in the digitally interconnected Chinese consumer base. Finally, we explore IKEA’s localization strategies in the Chinese market and how they utilize both foreign and Chinese cultures to maximize customer engagement. However, before looking at the strategies of the Swedish brand in China, we need to understand the landscape and prospects of China’s furniture market.

A brief dive into China’s furniture market

In 2021, 910 million pieces of furniture were produced in China. Strong growth is expected in China’s furniture market, projecting a CAGR of 11.6% from 2022 onwards and reaching RMB 1015 billion in 2026. Custom-made furniture is also on the rise in the PRC. With an annual growth of 20%, the custom furniture market alone is expected to reach RMB 334 billion by 2024. Demand for children’s furniture is also rising due to the implementation of the three-child policy under the Chinese government’s 14th Five-Year Plan.

Size of the furniture market in China
Source: National Bureau of Statistics, designed by Daxue Consulting, Size of the furniture market in China, 2020-2026

Furniture manufacturing trends in China

Domestic demand for furniture in China, in particular from continued urbanization, is the main driver of the Chinese furniture market. A unique characteristic holding Chinese consumers together with is the Guochao wave, as Chinese consumers are now increasingly demanding homegrown, domestic brands and products that reflect China’s rich cultural heritage. Furniture and home décor products that help express the consumers’ cultural and national pride will be popular amongst Chinese consumers.

Source: China Design Centre. Domestic furniture brand, PUSU, traces the classics of ancient Chinese literati lifestyles combined with modern living space

On the other hand, Chinese consumers have also become highly conscious of both the environmental impacts and materials used in the furniture they purchase. Many consumers even consider the appearance and design of their furniture to be secondary to the above factors. Especially with the rolling out of national environmental policies under the 14th Five-Year Plan, manufacturers must adhere to regulations such as materials used and pollutant emissions, also referred to as “green manufacturing”. The advent of green manufacturing is expected to be pivotal in the future of furniture production in China.

China is a major anchor point for manufacturing in IKEA, with suppliers in the PRC manufacturing over 22% of IKEA’s entire product range. Today, the Swedish brand performs well in its sustainability practices. However, the sheer scale of IKEA’s production makes fully implementing sustainable practices throughout the supply chain highly ambitious.

IKEA’s brick-and-mortar storefronts in China

As of June 2022, IKEA will have 35 stores across China. This is following the closure of a Guizhou store in April 2022, the first time that IKEA has had to close a store in the Middle Kingdom since entering the market 24 years ago. Furthermore, IKEA announced that the Shanghai Yangpu store will be closed in early July 2022, marking the historic closure of 2 stores in the PRC within the span of three months.

Source: Winshang, designed by Daxue Consulting, Number of IKEA stores in the PRC
Source: IKEA CN, IKEA store locations in China as of 2022

However, IKEA remains optimistic about the Chinese market. On the contrary, IKEA in China is confident in the dynamism and resilience of the Chinese economy, enjoying the complete supply chain–from design to retail–that the Chinese market affords. IKEA aims only to optimize its customer touchpoints and distribution ecosystem for Chinese consumers and market trends, producing an omnichannel customer experience.

New, innovative storefronts

IKEA revealed plans for renewed storefronts in the 2022 kick-off meeting as part of its business development strategy for the Chinese market. IKEA believes that Chinese consumers are developing more diverse, sophisticated needs, and need ways to express their emotions and values through home décor.

To fulfill customers’ needs in the era of “new-retail”, IKEA Xuhui Shanghai will become IKEA’s first “Home Experience of Tomorrow” store. The concept store was opened in late 2021 and uses innovative visual design, interactive experiences, and social co-creation as its cornerstones.

Source: Ingka Group, new showrooms and spaces in IKEA’s Shanghai Xuhui store.

A key paradigm shift within IKEA’s new store strategy in China is the abandoning of the guided path typical of IKEA stores. Instead, the Swedish brand aims to utilize an open layout to allow customers more choice on where they would like to shop.

Another key aspect of the planned store experience is its “inspiration spaces”, focusing on creating curated home décor spaces that provide customers with inspiration for their own interior design needs. In addition, the new store aims to create a community hub within its walls by allocating special physical spaces for workshops, knowledge-sharing, and entertainment in regard to home life.

Ultimately, IKEA in China aims to accommodate Chinese consumers’ desire for a richer, more authentic home life by offering design inspiration and social interaction, instead of only being a furniture retail store.

IKEA’s strategy in the Chinese market

In the PRC, IKEA uses digital channels, such as Chinese social media and micro-blogging, for its marketing campaigns to gain market attractiveness and brand recognition. IKEA also adjusted its store location strategy for Chinese consumers. Chinese consumers increasingly value convenience, so IKEA has also shifted from the classic ‘blue box’ store to more convenient storefronts closer to urban centers within cities, as well as further investing in facilitating e-commerce purchases. Overall, IKEA continuously adapts its strategies to the rapidly changing environment in China.

Standardization of vision and mission

“To create a better everyday life for the many people” is IKEA’s overarching vision, with the business objective being to “offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.”

In order to execute this business objective, the Swedish furniture brand applies the same business model (including the store interiors, range of products and services, management style, etc.) in all of its stores globally. Furthermore, the consistently minimalist design language in all of IKEA’s products is highly popular among younger Chinese consumers, a key customer group for IKEA.

Updated sales channels and e-commerce

With e-commerce as a key driver of the Chinese economy, IKEA kept pace by updating its sales channels. IKEA launched an online shopping service for Shanghai in 2016 and two years later, the service expanded to 149 cities in China. IKEA’s focus on e-commerce and delivery allows them to minimize costs and delivery fees to maintain and expand its customer base.  

In 2020, IKEA also opened its first mini-store in China, an “IKEA City” located in Shanghai’s bustling Jing’an district. The mall has 3,500 items on display, but customers can also access an additional 6,000 items through a digital platform. As a retailer that once only operated “big-box” malls on the outskirts of cities, IKEA in China plans to increase convenience, accessibility, and flexibility for consumers living fast-paced lives in highly urbanized Chinese cities.  

Now, IKEA’s omnichannel shopping experience in China composes of brick-and-mortar stores, a mini-WeChat program, mobile applications, IKEA’s website, and a flagship online store on Tmall. These channels work in tandem to provide avenues for shopping as well as customer support and maximize accessibility for customers. Overall, updating sales channels and customer touchpoints is a key driver of IKEA’s business in the PRC.

Photo source: Winshang, Guohua Shopping Center and IKEA

IKEA pop-up stores in China

Posting about shopping experiences on social media platforms is a key consumer behavior in China that the Swedish furniture brand takes advantage of. In 2019, IKEA launched its pop-up store in Beijing focusing on contemporary attitudes and aesthetics. It was a major hit on Chinese social media, with many young consumers visiting the store and posting about their experiences. By the end of September 2019, IKEA also opened two concept stores selling modern, innovative items, aiming to utilize word-of-mouth marketing through social media.

Daxue-consulting_Ikea Pop-up-store
Photo source: China.cn, IKEA’s pop-up store in the PRC

IKEA remains committed to opening pop-up stores across the country. In 2021, one opened in Kunming with a “delivery parcel” theme. In 2022, IKEA also opened a pop-up store in Hong Kong focusing on environmentally friendly and sustainability-produced items as well as the use of recycled and recyclable materials.

Source: IKEA, IKEA’s 2022 Hong Kong pop-up store

Service and product localization

Apart from the signature Swedish dishes, IKEA cafeterias in the PRC also serve localized dishes in order to fit local tastes. For example, there is dim sum in Guangdong, customers can enjoy Sichuanese hotpot in Sichuan, and spicy crayfish are the common dishes in the cafeteria in Shandong. More recently, IKEA launched traditional Chinese New Year puddings as well as the famed “Buddha jumps over the wall” dish in 2021 for the holiday.

This strategy helps keep customers in IKEA stores, and the Swedish brand adds to the novelty by keeping their localized dishes as limited-time offerings. In order to distinguish their creations from authentic Chinese, IKEA adds a Nordic spin to their dishes.

Photo source: Sohu, Dim Sum of IKEA in Guangdong
Source: Sohu, top: Hot pot of IKEA in Sichuan, bottom: Spicy crayfish
Photo source: Sohu, IKEA’s promotion on Chinese social media

IKEA in China: Turning controversial customer behavior into business opportunities

In the mid-2010s, the Swedish brand was confronted with a troubling phenomenon: customers in China would sleep and relax on displayed furniture in IKEA’s stores. IKEA came under pressure to respond to these customers’ behavior, especially as IKEA prohibits this behavior in stores outside of the PRC.  

However, IKEA announced that they had no intention to prohibit customers in China from sleeping on their furniture. The rationale was that the more consumers were able to experience using IKEA’s furniture, the more they are likely to purchase. The Swedish furniture brand even established pop-up displays for customers to rest on. Although IKEA generally standardizes the store policy, they were willing to adjust it for the Chinese customer base.

Key takeaways from IKEA’s strategies in China

  • Guochao and green manufacturing are key trends in the Chinese furniture industry that IKEA utilizes to capture the Chinese market.
  • IKEA identified that physical storefronts must become more engaging and immersive to truly differentiate offline from online shopping.  
  • IKEA in China focuses on an omnichannel shopping experience that makes purchasing as easy as possible for customers.
  • For the Swedish furniture brand, social media marketing and word-of-mouth are key strategies for building brand equity and recognition.
  • Localize when needed: IKEA retains the aspects of foreign culture that Chinese consumers enjoy but also caters to certain local tastes and preferences.  

Learn more about The Emergence of Chinese Luxury Brands