Why Ikea Encourages Chinese to Make Its Stores Their Own

Courtesy of Ikea China/Yu Studio

Visit an Ikea in China and you'll see people getting comfortable -- very comfortable. They're dozing on Malm beds and curling up on Karlstad sofas. It's as if they're trying on a new life: one that comes with European-style furniture.

 

As a PR event, Ikea hosted a wedding for three couples in its Nanjing store. 

 

In Western countries, couples in Ikea stores might be spotted bickering over what bookshelf to buy, but in China the cheery, modern showrooms spark dreams of domestic bliss. One Chinese Ikea even hosted a trio of weddings.

The Swedish retailer, in fact, elicits surprising reactions here. Ikea is proof that in China luxury labels aren't the only aspirational brands, said Camilla Hammar, Ikea China's marketing director. "If you compare [Chinese consumers] with Europeans, people here still believe that tomorrow is going to be better than today," she said. For Ikea, the question then is: "How do you tap into that and make an emotional connection to your brand?"

The company had a slow start at first after entering the market 15 years ago. But it lowered prices by about half since 2000 with more local sourcing. It also learned what didn't work: Chinese-inspired designs, for example. Consumers wanted Ikea's modern European look.

Now Ikea has 14 stores in China and plans to add three a year until 2020.

Ikea China says sales were up 17% year over year to $1 billion in the year ending in August 2013. Meanwhile, competitors have struggled: Home Depot closed all its Chinese big-box stores last year.

Camilla Hammar, marketing director, Ikea China 

Before joining Ikea in 2006, Swedish-born Ms. Hammar was the marketing director at Shanghai Tang in Hong Kong. Ad Age caught up with her in Shanghai to ask about in-store nuptials and customer catnaps. The interview has been lightly edited.

Ad Age: When you walk into an Ikea in China, you see people dozing on the beds. People take their kids there to play with the toys. What do you do about it?
Camilla Hammar: It's one of our strengths -- that people actually come closer to the [product] range and try it. So we actually welcome that.
Ad Age: What's the craziest thing you've heard of?
Ms. Hammar: People literally getting into the beds, taking off their shoes, getting under the covers. Not just one person, but sometimes as a couple or with a child.
Ad Age: Sounds like they get pretty personal with your products. How do you tap into that with your marketing?
Ms. Hammar: We've realized the store experience in China is very different [than in other markets]. It tends to initiate very romantic feelings. The first time some couples start talking about getting married is in our showrooms. So that's something we've tapped into.

Camilla Hammar, marketing director, Ikea China

We have had weddings in our store in Nanjing. We did that as a PR event. It was a wedding with three couples, and we set it all up in a Swedish style. I was there as one of the witnesses. My daughter, who is blonde with curly hair, was the flower girl. We served Swedish food.
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Why Home Depot Struggles and IKEA Thrives in China?

At a time when China’s home furnishings market surged 17 percent, the largest U.S. home improvement company Home Depot has been struggling and closed five stores since it entered the China market in 2006.

Analysts pointed to the fact that a “do it yourself” culture does not exist in China. True.  Because labor costs are relatively low, many homeowners would rather hire someone to do the work than do it themselves. Apparently, Home Depot made the same mistake as some other companies that entered China without understanding the local market, which is often dramatically different from their home market.

Unlike consumers in the West, Chinese consumers have no role model from older generations. Home ownership was non-existent about fifteen years ago. It was then very common for a family, sometimes three generations, to share a 300-square-feet room that they used for sleeping, eating and daily activities. A kitchen was not even a necessity as many people simply cooked in a common area outside their room.

In the last fifteen years, home ownership has gone from practically zero to about 70 percent. However, many people have little sense of how to furnish or decorate a home.  They are very eager to learn from the West. This is one of the reasons that IKEA is very popular in China. Their Western-style showrooms provide model bedrooms, dining rooms, and family rooms showing how to furnish them. Their stylish and functional modern furniture is particularly appealing to young couples.

I visited IKEA in Shanghai. The 360,000-square-foot store was packed with people shopping for furniture and household appliances for their new homes. The store offers more than seven thousand products and features a five-hundred-seat restaurant and a spacious and colorful children’s playground. Some people come to IKEA to experience the Western style of living, or simply for recreation, as if it were a theme park.
While Home Depot reduced its stores in China from twelve to seven, IKEA plans to double the number of its stores from its current eight to fifteen by 2015. In a country where millions of new home owners are added each year, companies cannot afford to lose this potentially huge market. Here are some important lessons that we can draw from the Home Depot case:
    * Chinese consumers need to be educated as they have no role models. They are eager to learn but they need guidance. Companies that invest in educating the market can expect to reap handsome rewards.

    * Pay attention to local customers’ preferences. For example, the kitchen is usually small and considered secondary in a Chinese home. Chinese cooking usually blackens the kitchen with soot and grease and is the domain of an ayi, or household helper, who cooks for the family.

    * Most Chinese homeowners live in condominiums rather single family homes. They do not have a garage that can store tools and ladders. A more appealing package would be pre-designed interiors with installation included.

Since the Chinese consumer market is new and still emerging, companies have an opportunity to rebrand their products and services. For example, GM China has done a better job of truly listening to customers than GM North America has. Many middle class Chinese like to drive their parents around on weekends and some can afford to hire chauffeurs. GM’s Cadillac SLS model addresses the needs of the Chinese market for a roomy, luxurious back seat for chauffeur-driven riders.

In order for companies to succeed in a new market, it’s critical that they study the market and adapt to local conditions. It is still not too late for Home Depot to turn itself around in China.

/written by Helen H. Wang, Forbes/