A standardised approach to the world? IKEA in China

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A standardised approach to the world? IKEA in China
Article in International Journal of Quality and Service Sciences · July 2009
DOI: 10.1108/17566690910971454
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2. A standardised approach
to the world? IKEA in China
Ulf Johansson
Department of Business Administration, Lund University, Lund, Sweden, and
Åsa Thelander
Department of Communication Studies, Lund University, Helsingborg, Sweden
Abstract
Purpose – The purpose of this paper is to analyse the marketing strategy in China of the furnishing
retailer IKEA in the context of standardisation and adaptation of marketing activities. IKEA’s strategy
in China is compared to its corporate strategy throughout the rest of the world.
Design/methodology/approach – The four P classifications are used as a framework to compare
the central marketing strategies of IKEA with marketing strategies used in China. The paper builds on
both primary and secondary data. Interviews with senior managers at IKEA are conducted and
studies on business and retailing in China are used.
Findings – The marketing strategies used by IKEA in China are found to be different from the
standardised strategies it uses throughout the rest of the world. Several of the changed strategies are
central to the business concept of IKEA.
Research limitations/implications – The present paper shows the challenges for a standardised
marketing concept and its implications.
Originality/value – The paper provides, in the context of the standardisation and adaptation of
marketing activities, a more nuanced and up-to-date picture of the strategies used by IKEA compared
to previous studies.
Keywords Retail management, Marketing strategy, Standardization, China
Paper type Research paper
1. Introduction
Retail internationalisation is not a new topic. Rather, it is one of the most discussed
topics in retailing in the last ten to 20 years. The themes on these topics have varied.
Much of the literature focuses on the direction of internationalisation – where different
international retailers have aimed their internationalisation efforts and their modes of
internationalisation, e.g. organisational forms used to enter new markets such as
strategic alliances, joint ventures, acquisition, greenfield development, etc. (Alexander,
1990, 1997; Brown and Burt, 1992; Burt, 1991; Dawson, 1994; Gielens and Dekimpe,
2001; Gripsrud and Benito, 2005; McGoldrick and Davies, 1995; Pellegrini, 1991, 1994;
Salmon and Tordjman, 1989; Sternquist, 1998; Treadgold and Davis, 1988; Williams,
1992; Wrigley and Lowe, 2002; Vida, 2000). Some parts of this literature are fairly
descriptive in their nature, trying to describe the patterns and modes of
internationalisation following the more general literature on international business
( Johanson and Widersheim-Paul, 1975; Johanson and Vahlne, 1977, 1990). Another
major theme has been the notion that retail internationalisation does not follow a linear
success model but rather is a process of entry and withdrawal, denoting failures in
internationalisation (Burt et al., 2002, 2005).
The current issue and full text archive of this journal is available at
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International Journal of Quality and
Service Sciences
Vol. 1 No. 2, 2009
pp. 199-219
q Emerald Group Publishing Limited
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DOI 10.1108/17566690910971454

3. A theme that dominates the literature on international marketing is the question of
standardisation and adaptation of marketing activities from a company point of view
(Baek, 2004; Levitt, 1983; Lim et al., 2006; Theodosiou and Leonidou, 2003; Szymanski
and Bharadway, 1993) or from a consumer point of view (de Mooij, 2004). This
discussion has not really penetrated the field of retailing. With a few exceptions that
are mainly general discussions on the subject (Mårtensson, 1981; Salmon and
Tordjman, 1989; Treadgold, 1991), there is not very much research in this area. This is
a strange shortcoming because, to a large extent, the literature on retailing seems to
follow that of international marketing.
Despite the fact that research on failures in international retailing argues that the
former patterns of internationalisation are no longer true (Burt et al., 2003), it seems clear
that for European retailers, interest in Asian markets is not particularly developed – and
that some of these markets do not give the easy successes expected early on. Some
arguethatthesemarketsaredistantinseveralsenses(DupuisandPrime,1996;Evansetal.,
2000; Evans and Mavondo, 2002) compared to the origin of many of the retailers active
there. This is something that seems especially true for the Chinese market – the focus of
this paper.
IKEA, the Swedish home furnishing retailer, has been present in China since 1998.
The company had three stores in 2006 but the plan is to build ten stores by 2012.
Compared to expansion elsewhere in the world, expansion in China has been fairly
slow, by IKEA standards – three stores in eight years – but the company views it as
successful. This may be an indication of the challenge ahead. After a fairly slow start,
IKEA has seen substantial growth in China; between 2004 and 2005 sales grew by
50 per cent. Still, with a turnover in China of approximately $120 million, the business
did not make a profit. However, IKEA management insists that they would make a
profit in the near future.
Asia (including Australia), only accounts for 3 per cent of IKEA’s turnover, while
Europe has a share of 81 per cent and North America 16 per cent. Still, Asia and indeed,
China, are a big sourcing market for IKEA. Asia accounts for 30 per cent of IKEA’s
sourcing with China being the biggest individual sourcing market for IKEA with 18
per cent of total sourcing.
A characteristic that makes IKEA stand out among global retailers is the – alleged –
standardised approach to every market it enters. It looks and operates the same in every
market. Or does it? Existing analyses of IKEA’s marketing strategy are either fairly old
(Salmon and Tordjman, 1989) or examined from a very general perspective (Salzer, 1998;
Mårtensson, 1981, 1987) with little emphasis on marketing activities in specific countries
and also with a lack of understanding of what standardisation and adaptation might
mean in a retail perspective. More recent studies (Edvardsson and Enquist, 2002;
Edvardsson et al., 2006) have a distinct service-management perspective rather than an
overall marketing-strategy perspective.
In many ways, China is a culturally-different market and in that sense, it is a
challenge. As already mentioned, price is one challenge for retailers who enter the
Chinese market. For IKEA, with its emphasis on price, low prices in China are a big
challenge. Past experience of entering different markets has not always been positive.
During the 1970s and part of the 1980s, IKEA tried to enter Japan but at that point in
time, the Japanese did not like the flat packaging, which required do-it-yourself (DIY)
skills.
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4. Among academics there is an increasing argument that one key success factor in
international retailing has been the adaptation of marketing strategies, rather than
standardisation (Dawson and Mukoyama, 2006; Rundh, 2003; Samiee et al., 2004). The
adaptation of marketing strategies seems to be especially true for internationalisation
in Asia and in China. So where does that leave IKEA and its business model? Is it
something that only works in Europe and the USA? Will IKEA, like other retailers,
have to adjust its strategies to meet the very demanding and different Asian
markets?
The aim of this paper is to analyse IKEA’s marketing strategy for China, in the
context of the standardisation and adaptation of marketing activities. IKEA’s strategy
in China will be compared to its corporate strategy in the rest of the world.
2. Conceptual framework
What is standardisation and adaptation really about? As Ryans et al. (2003) pointed out
there is no consensus among researchers. However, this quotation sums up what
standardisation (and adaptation) could be:
[. . .] the offering of identical product lines at identical prices through identical distribution
systems, supported by identical promotional programs in several different countries (Buzzell,
1968, p. 103).
This definition stresses, in accordance with much of the literature, the four P
classifications: product, price, place and promotion. Standardisation and adaptation
thus refer to how and if marketing activities are adapted (in reference to the four Ps), or
not, across countries in which a certain company operates. Other researchers have
dealt with standardisation and adaptation based on the appropriateness of each
strategy. One of the more well-known advocates of standardisation of strategies, Levitt
(1983, p. 65) argues:
The modern global corporation contrasts powerfully with the aging multinational
corporation. Instead of adapting to superficial and even entrenched differences withering
and between nations, it will seek sensibly to force suitably standardized products and
practices on the entire globe.
Levitt argues in a general sense and mentions no products and no markets as
exceptions from his vision of the globalisation of markets. It would be the same vision
for sectors that mix product and service (like retailing) and also for very different
markets across the globe. Levitt sees factors, like technology and converging consumer
demands, as driving forces. Although he was influential and after much debate, it is
suggested that the weakness of the Levitt article lies just in his general perspective.
From a very general perspective, it can be argued that everything looks the same.
Opposing views in the standardisation and adaptation debate are those who argue
from a national, cultural perspective (Hofstede, 2001; de Mooij, 2004). Without much
statistical evidence, two other advocates suggest that the world is “spiky” (Florida,
2005), rather than “flat” (Friedman, 2006): the business landscape is not homogenous
but instead heterogeneous making adaptations necessary, at least when the view is
international and working in culturally-diverse markets. Levitt and his fellow
“globalists” argue that the world is becoming more homogenous, paced by technology
and converging tastes. The author, de Mooij (2004) and others, argue that yes, the
world is changing and that consumers, all over world, are having more of the same
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5. opportunities like increasing incomes but it does not mean converging consumer
behaviour. He argues that consumer behaviour is not rational and the mirror effect is
that companies’ marketing strategies cannot be standardised all over the world.
Examples from soft drinks, clothing and automobiles are used by de Mooij to show
that consumer behaviour is diverging rather than converging and that companies
adapt their marketing strategies to national tastes and preferences.
While the debate on the appropriateness of standardisation or adaptation of
marketing activities has generated a lot of research in other areas, there is not much
research on the topic in international retail, despite the centrality of this theme in
international marketing. We find some discussions of this related to specific areas in
retailing, for example, image research (Burt and Carralero-Encinas, 2000; Burt and
Mavromatis, 2006; McGoldrick, 1998; McGoldrick and Ali, 1994; McGoldrick and Ho,
1992) but very little research of a more general nature, relating to the overall marketing
activities of retailers. Image mainly concerns itself with the effects of retailer marketing
strategies (what type of image has been created in the consumer’s mind by contact with
the retail company). Seldom are the particular strategies used to create the consumer
image discussed in the literature. Some authors (Sternquist, 1997) discuss global
retailers’ standardised expansion strategies but on a very general level, mentioning
mostly private labels and formats.
Mårtensson’s study, focused on IKEA from 1981, where IKEA is used as an
example of diffusion of innovation in the area of international retailing. Mårtensson
gives a detailed picture of a rather centralised retailer. A few years later Salmon and
Tordjman (1989) published their classical article where the issue of standardisation for
global retailers is discussed. Here, C&A, Benetton/Laura Ashley, IKEA/Conran and
Marks & Spencer are analysed and IKEA is found to have centralised management but
adjusted marketing (in dimensions like assortment, pricing and promotion). Both
studies are rather old. Salmon and Tordjman’s study is 20 years old, building on an
expansion that included 74 outlets between 1974 and 1987. Recently IKEA has 208
stores and has moved into markets that are outside Europe and the USA, the
traditional stronghold for IKEA. Hence, it follows a company that was essentially a
European company at the time of the study.
Treadgold (1991) discusses international retailers in the context of local
responsiveness and benefits from integration. Global retailers – such as IKEA – are
argued to achieve high benefits from integration and display low-local responsiveness.
The discussion of marketing activities is on this general level and very little knowledge
is focused on different marketing activities. Also, as is the case with Salmon and
Tordjman (1989) and Mårtensson’s (1981, 1987) studies, the material covers the infancy
of international retailing and does focus on IKEA.
With the exception of Mårtensson’s (1981), now-quite-dated study, there is a general
lack of empirically-based studies of retailer international marketing strategies. Much of
the discussions in the existing literature are very general and can only be expected to
have captured strategies in the sense of policy, i.e. how strategies should be
implemented. The actual implementation and tactics on for example, the local level of a
centrally-planned marketing strategy, can be expected to differ to a certain degree.
Thus, we argue that one of the things that the international retail strategy literature
suffers from is a lack of empirical research, which means that policy is seen as actual
implementation and tactics.
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6. 2.1 Conceptualising marketing activities by retailers
When analysing different marketing strategies, there is a need for a classification of
different marketing activities. That is the next step in our conceptual framework.
Marketing activities by companies in general, can be and have been, described in the
literature in many different ways. The most common one, the marketing mix
(containing the four Ps of marketing; product, price, place and promotion) is not
without competition. In the area of industrial marketing, relationships have been seen
as the main marketing vehicle rather than manipulation of price, etc. (Ford et al., 2003).
Service marketing takes a similar stance, focusing more on the role of personnel in the
marketing process (Grönroos, 2000). Generally, marketing activities can be seen as
ways for the seller – in this case the retailer – to adjust their offer to the market. That
is how marketing activities are seen and used below.
In the retail sector, the retail marketing mix is the most-used classification (Davies and
Ward, 2001; Fernie et al., 2003; Freathy, 2003; Kent and Omar, 2003; McGoldrick, 2002;
Varley and Rafiq, 2004). However, as retailing is quite different from manufacturing (which
is the original base of the marketing mix), it needs modifications to make it fit with
conditions in the retail sector. Aside from the products – merchandise – the
conceptualisation needs to contain areas that deal with one of the different aspects of
retailing, i.e. the store and what happens there. Location, store formats as well as selling
environment within the store, are relevant areas, which are often used in the retail literature
referenced above. As retail organisations are increasingly active in the “traditional”
marketing category of advertising and promotion, the conceptual framework also needs to
include this. Accordingly, the conceptual framework that we use here is generated from the
“traditional”waysofthinkingaboutmarketingand howtoadjustthemarketoffering, butit
has been adapted to fit into the subject area of retailing.
Merchandise is a broad marketing activity and is related to putting together an
attractive assortment of products for the consumer to buy in the store. The dimension
includes the question of national and retailer brands, pricing and pricing strategy, as
well size of assortment and local variations in the assortment (compared to standard
assortment for a certain chain). Location and store formats refer mainly to where
retailers establish their outlets or stores. As we will not make a detailed
location-analysis in this paper, location is seen mainly as a dimension, which varies
in relation to where, say, a city-centre store is located. In this study, store format relates
to the general set up of a store, i.e. the overall lay-out of the store in terms of number of
levels, placing of different departments and how space is distributed. Advertising,
which includes different types of advertising such as, print and outdoor, as well as
different types of promotional activities, are both relevant and tools used by retailers.
In addition, the type of media used and the content of the messages are also relevant
issues. The fourth dimension is the selling environment and service of the store.
It involves several issues (and is often called the in-store environment) and includes the
overall design of the store, atmospherics and signage. Service and service levels are
also included here, in terms of the number of personnel; as are “social dimensions” such
as, other customers in the store environment.
3. Methods
This paper is based on both primary and secondary data. Previous studies, where IKEA’s
strategy is analysed, were used as background information. As already mentioned,
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7. some data were old and dated and a range of different aspects of data were analysed.
To update some of the information, various documents were analysed, like IKEA’s
publically-available web site. We also collected and analysed different advertisements
used by IKEA. Second, internal documents were used, which interviewees shared with
us though they were not available to the general public. In order to gain information
on current strategies, IKEA managers were interviewed. We selected top-level,
senior managers, who define the strategies on country level and on store level, in order
to cover different perspectives of the strategies and to get an insight into IKEA’s
marketing strategies and tactics. In total, ten interviews were conducted including
managers responsible for the Chinese market as well as lower-level store managers
based in China. Issues covered in the interviews paralleled and followed the classification
ofmarketingactivitiesmentionedabove.Inordertogetfirst-handexperienceofmarketing
strategies related to real stores, observations were made specifically about the
Shanghai store.
4. IKEA’s general marketing strategy
IKEA is the world’s largest furniture retailer. It was founded in 1943 by Ingvar
Kamprad who used his initials I and K together with E – the name of his parents’
farm – and A, which stands for Agunnaryd, his hometown. He opened the first store in
Älmhult, Sweden in 1958 and since then the expansion has been exceptional. Today,
IKEA itself owns 216 stores in 24 countries. The IKEA group owns 258 IKEA stores in
24 countries and during FY08, planned to open about 22 new stores (IKEA corporate
webpage, 12 January 2009). If stores run by franchisees outside the IKEA group are
also counted, there are a total of 292 IKEA stores in 36 countries/territories. Hence, it is
an international retailer operating in many parts of the world. China is one of its latest
expansions and Japan is the latest (2006).
To describe IKEA’s marketing (IKEA corporate webpage, 12 January 2009) strategy
it is necessary to start with its business concept as formulated in IKEA’s business
mission:
IKEA offers a wide range of well-designed, functional home furnishing products at prices so
low that as many people as possible can afford them.
The key words in the business mission, address several marketing aspects and the
marketing strategy can be seen to emanate from it. One central theme is the alleged
standardised approach of IKEA: IKEA’s guiding principle is to work in the same way
in every country within which it operates. The main reason is that it gives operational
advantages and makes it possible – it is argued – to keep the prices low and attractive
for as many people as possible. Another reason is that they want to create the same
image everywhere. Hence, standardisation is part of their business concept and below
we have described and analysed what it means.
According to the business mission, the target group is “many people” which is all
customers, no matter their age, sex, social class or income. This might be achieved in
their domestic market, like in Sweden but not in other countries.
The basis of the marketing strategy is the merchandise, i.e. the product range and
the prices of the products. These are supposed to be the same all over the world. The
total product range covers more than 10,000 items. Very small adaptations for all
countries and all stores are made. The product brand used in the store, IKEA, is the
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8. same everywhere in the world. The Swedish product names are also used all over the
world. The Swedish names can be seen in any catalogue and store.
Referring to the business mission, prices on products are supposed to be considered
low in comparison to what consumers find in competing stores as the aim is to deliver
high value at low price. It means that price is relative and compared to the market in
each country, which results in different prices on the same product in different
countries. Sometimes prices vary considerably between two countries; it results in
Swedes buying IKEA kitchens in Poland. The business mission does not address store
locale, the selling environment or service levels but it does have well-developed and
standardised strategies, which deal with these factors. IKEA stores are mainly located
on the outskirts of major cities making access by car the preferred mode of
transportation for customers.
Store formats are standardised and come in three different sizes with different
assortment sizes: 7,500-10,000 articles; and assortment differs little between the same
store formats across countries. So far, the stores have two levels: the second floor with
room settings, displayed furniture and children’s department, the restaurant and
cafeteria are also placed on the second floor; the first floor is called the market hall
and the product range covers home decoration, accessories, etc. The layout of the store
and the different departments are generally the same in every store. The customer is
guided through the store by a path with arrows.
The selling environment in the stores is designed to encourage interaction with the
customer. The customer can see the products in a room setting, touch them and even
try them. The store environment is supposed to look the same in relation to: store
layout and design, signage, display and colours, service level, etc. This aims to give the
same shopping experience regardless of where the store is located. However, this does
not mean that adaptation is not made in individual stores. For example, in different
stores the room-settings are adjusted to fit in with the local housing and living
conditions, rather than using a centralised formula. This might mean for example, that
there are smaller rooms in some countries and more fireplaces in British room settings.
Service levels are supposed to be the same around the world with staffing about the
same also. IKEA’s concept of the customer’s role in relation to the low prices have
important implications for the level of service: to have such low prices the consumer
pays the price – they have to pick things up in the store, carry them to their car, take
them home and assemble them (even though home delivery and an assembling service,
at a cost, is now widely available).
IKEA’s advertising and promotion is dominated by the catalogue; a marketing
instrument that is unusual for an international retailer but at the core of the marketing
strategy of IKEA. It is the most important marketing tool as can be seen by the fact
that 70 per cent of the annual marketing budget is spent on the catalogue. It is
produced in 38 different editions, in 17 languages for 28 countries. It is produced
in-house with a standardised layout, with the same products and same overall
information; adjustments for editions in different countries or regions are fairly minor.
To some extent, the covers of the catalogues differ; the models that are used differ and
extra information may be added, for instance in countries or regions where low
familiarity with the concept is expected, information about the shopping procedures is
added. Some of the advertising is produced in-house while some is produced locally.
This conforms to a section of the overall marketing strategy, which says that although
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9. it is an international organisation – with central guidelines on required market
position – it can adjust messages and offers to fit local tastes and local competition.
IKEA believes its strength is to be able to adapt to local customs and culture. However,
the central guidelines must be followed and in several countries, IKEA’s uniqueness
and innovativeness related to the local context, is emphasised. In Britain, campaigns
have been launched based on the guidelines and one of the best known is the
“chuck-out the chintz” campaign, where British consumers were urged to break with
tradition. Chintz was used as a symbol for the traditional-style home.
Naresh Ramchadani, who is the creative partner for IKEA’s UK advertising said:
We showed IKEA tables to women – who make 90 per cent of the decisions about home
décor – and realised that there was a difference between consumer’s taste and IKEA’s taste.
That’s how we reached the “chuck out the chinz” tagline (Aitken, 2004).
In German and Austrian campaigns, “IKEA celebrates Kurt” was used to urge
customers to renew their homes (Zentes et al., 2007). Both campaigns received a lot of
media attention, as they were provocative. It should be noted that local or regional
store-based promotions or advertisements are the responsibility of the local store
manager.
IKEA also uses image events in order to get attention. For instance, IKEA furniture
was displayed in bus stops in Copenhagen. The activity gained a lot of coverage in the
press. Those activities and product placements are planned and produced on a national
level by local managers as they believed attitudes to furniture varied. The store
manager may produce press releases concerning the store. However, a recent study on
the representation of IKEA in the Swedish and British press ( Johansson et al., 2008)
indicates that news related to the store is rare except for new store openings. Most
news is about products and the company, which means that they concern issues
organised by the national office. More interesting is that the representation of IKEA in
the press varies considerably between Sweden and Britain. The strategic work with the
press seems to differ in different countries.
A growing part of IKEA promotion is the IKEA family, IKEA’s loyalty programme.
It consists of a loyalty card, a magazine with several issues a year and a special
assortment of products in the store. In some cases, IKEA family card holders also get
discounts on other products in the store. Unlike other loyalty programmes, the
customer does not earn any points on their purchases. While it has been used for
several years in Sweden, it is only in recent years that it has been introduced in other
countries. The broader launch of the card is partly a belief that a loyalty programme
for IKEA (which has worked very well in Sweden) could work well and be a relevant
part of marketing strategies in other countries.
From the description above, it is possible to discern that the control over the
different marketing aspects for IKEA varies. It can be illustrated in a triangle.
Figure 1 shows that marketing aspects in the lower part of the triangle – the basics
such as, range and products, store and the catalogue, are controlled by IKEA in
Sweden. These are also the aspects that are standardised and are supposed to be the
same all over the world. Only small adjustments are made. At the top of the triangle are
the IKEA family concept and advertising, promotion, etc. which are controlled locally
or from at a country level. Those aspects are less standardised and more adjusted to
local or regional contexts.
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10. Looking at IKEA’s marketing strategy, a conclusion must be dawn that it is
standardised – using the same marketing instruments in the same way around the
world – giving individual countries and stores a minimal opportunity to respond to,
what is perceived as, national and local market needs. From IKEA’s point of view, the
strategy of standardisation is logical as it provides a product with a “low price” for
“as many people as possible” in a way that an adapting strategy would not.
4.1 IKEA in China
Recently, there are three stores in China, in Beijing, Shanghai and Guanzhou. While the
first two stores are joint ventures (to comply with regulations in place until 2004 and
the inclusion of China in the World Trade Organization, the new store in Guangzhou is
wholly owned by IKEA, which is how IKEA will operate in China in the future.
Entering into the Chinese market was a big step for IKEA, maybe as big as their
first step abroad when they opened the store in Spreitenbac, Switzerland in 1973
(Torekull, 1998). China is potentially a huge consumer market but it is quite a different
market to what they have faced before.
First, the language is different and IKEA uses a Chinese name alongside the name
of IKEA. It is pronounced Yi Jia, similar to the English pronunciation of IKEA. The
meaning of IKEA, in Chinese, is positive and very appropriate: IKEA translated in
Chinese means “desirable for home living/comfortable home”, which is regarded as a
very good translation in China. According to IKEA, “IKEA” is a well-known brand. In
Shanghai, 96 per cent of people living in the catchment area of the store know of IKEA.
Fortune Cookies (Dagens Industri, 2006) the first market and opinion poll in China,
showed that among people with a monthly income of no-less than RMB 2,500, living in
urban areas and aged 15-55, as many as 75 per cent knew of IKEA (Cui and Liu, 2001).
In a country with a huge population like China, IKEA does not target as many
people as it does in other countries. The main target group is female, as they are
believed to be the ones that take decisions about the home. About 65 per cent of all
customers are women in China. Women in China, according to IKEA, stand for change
Figure 1.
Responsibility for IKEA’s
different marketing
aspects
Products and product range
The store
The catalogue
IKEA family
Advertising Local
Global
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11. and they welcome change. It suits IKEA as they see themselves as providing the tools
for change in at least one aspect of life: home decoration and furniture. Men are also
targeted but more indirectly, because women have home-furnishing interests and
actually make the decisions. IKEA also targets young customers – attracting people
aged 25-35. The core customer is around 30 years old. Many from IKEA’s target group,
are what in China are known as “the little emperors” and in literature they are also
labelled “the me-generation” or “the lifestyle generation” (Schütte and Ciarlante, 1999,
p. 139). This is the generation born during the One Child Policy and today they are
between 15 and 27 years old. One of the characteristics of this group of consumers is
that they are believed to be impulsive, easy to influence, very social and committed to
leading foreign consumer brands (Gunnarsson, 1997). They are seen as the future
generation that will soon be furnishing their own homes. This segment of the
population includes some 30 million people.
IKEA customers in China are different in other ways. They are well-educated and live
in the big cities in China. As the salaries of the target group increase every year, so do the
numbers in the target group. The typical customer in China, buys less when they visit
the store than the average IKEA customer elsewhere. But in Shanghai for example, the
core customers visit IKEA more often than anywhere in the world: 33 per cent come
every month. This means – among other things – that there is a need for many changes
in the store. The Shanghai store rearranges its room settings at least seven times a year,
for new products or just for different holidays and campaigns, etc.
IKEA’s offer in China is to supply affordable solutions to Chinese customers, but the
overall image is different (see below), forcing IKEA to offer other values to their
Chinese customers. The primary market of the Shanghai store is the core customers’
monthly household income, which is RMB 6,000. This is high by Chinese standards
but compared to other markets, where IKEA is present, it is not so high. IKEA’s criteria
for comparing different countries is by comparing how much work is needed in
different countries to buy a certain set of products. The Swiss work only two months to
buy the product set, while the Chinese work one year and six months to buy the same
set of products. The following sections will describe and analyse the four marketing
elements: merchandise; location; store formats and advertising and promotion.
4.1.1 Merchandise. Everything in an IKEA store, in China as everywhere else in the
world, is sold under the private brand IKEA. In the Swedish IKEA stores there are
exceptions as it holds famous Swedish food and drink brands, but in home furnishing
it is only the IKEA brand.
All products, as everywhere else in the world, have Swedish names and the
assortment in a Chinese IKEA store is very similar to one in for example, the USA. In
1998, three products were added in China – chopsticks, a wok with a lid and a cleaver –
but they are now in almost every store around the world. The Chinese IKEA stores have
a special set of teacups for the Chinese New Year. Also, 500,000 plastic placemats are
produced to commemorate the year of the rooster (Business Week, 2005). At the moment,
in mainland China as well as in Hong Kong, the beds sold are shorter, 190 centimeter
compared to standard-sized beds of 200 centimeter. This is currently being reviewed but
so far constitutes another adjustment in the assortment of products to fit local/regional
demand. Many Chinese people live in apartments with balconies, which is very
important to them. IKEA has added model sets and special balcony sections in the
stores, which show how you can furnish your balcony (Lewis, 2005).
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12. However, there are some major challenges for IKEA in China that the citation
featuring IKEA’s Asia boss sums up:
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 did not 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 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 non-sale items 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
(The Wall Street Journal, 3 March 2006).
In most countries, the image of IKEA is that they have low prices, which is one of the
competitive cornerstones of its business mission (see above). But it is not the case in
China where it is rather the opposite that is the perception: that IKEA is a fairly
exclusive, western retailer and the store is for the higher-middle class (Lewis, 2005). For
example, “Billy the bookcase”, which elsewhere is inexpensive and high selling, was
perceived as a luxury (Jungbluth, 2006). While the customers’ different perception of
price has been accepted, the main strategy has been to cut prices. In order to do so,
IKEA in China has been allowed to “break” unbreakable codes and rules in the IKEA
organisation. They have been given the authority to ignore sourcing guidelines that are
legio for the rest of the company. The basic step in the pyramid.
China is a big sourcing country for IKEA, for example, providing products to
Poland. In China it has meant that imported products were subject to import taxes
(about 22 per cent) and an initial lead-time of 12 weeks, though it has now been reduced
to five weeks. To be able to continue cutting prices in the Chinese market, IKEA China
has been allowed to exceed and expand its sourcing of products in China, while the rest
of IKEA still sources the same products from somewhere else in the world. The actual
figures differ a little on how many of the products in a Chinese IKEA store are sourced
in China. Some say that half of the products in a Chinese IKEA store are made in China,
compared to 23 per cent in other countries’ IKEA stores (The Wall Street Journal, 2006).
IKEA representatives claim that 30 per cent of the assortment is made in China and in
addition, the local trading office is now looking for Chinese suppliers for 500 more
articles.
According to IKEA, this has resulted in lower prices as they have dropped by at least
30 per cent since 2003; on some products the price has dropped as much as 90 per cent.
IKEA’s single-seat Ektorp armchair retails for US$112 in China, which is 67 per cent
lower than the same chair sold in the USA (The Wall Street Journal, 3 March 2006).
IKEA, like many other companies doing business in China, is subject to copying.
One observer noticed that many Chinese shoppers in IKEA were drawing pictures of
the furniture and scribbling down descriptions of the products but not necessarily
buying them (Lewis, 2005). Copying IKEA furniture and style is to some extent easy.
The catalogue and the store even provide measurements of the furniture. An
IKEA-style home furnishing has, in some areas, become a concept of its own, outside
the control of IKEA. If you search the baidu.com, a local Shanghai web site, for “IKEA
style” you will get more than 39,000 hits. By providing a focus on giving help on home
decoration rather than on selling individual products, it is easier to achieve a position
that is not taken over by competitors that copy individual products: the Karlanda sofa
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13. is easy to copy but not the home decorating skills provided by the company in the
store, on the web site or in the catalogue.
If price will not always be IKEA’s main attraction in China, what will be the
attraction? IKEA tries to position itself as a company with a unique competence in
relation to interior design. Helping customers with interior design is the basic message,
rather than selling individual products at low prices. Focus here has also been on
selected design elements, like storage. Many Chinese people live in small apartments
and IKEA can help with smart solutions for storage that make life easier (at least that
is IKEA’s argument). The argument is very much about function while this contrasts
with the traditional furniture manufacturers in China where everything is about
tradition.
From experience, IKEA knows that markets run through a life-cycle: when stores
open in a new country, most customers buy, what IKEA calls, market-hall products, i.e.
everything but furniture. In established countries, the proportion is said to be: 65 per
cent buy furniture and 35 per cent buy market-hall products. It varies across IKEA
stores in China but China has matured relatively fast with proportions between
furniture and market-hall products are fast approaching those in more mature markets
like those of Sweden and Germany.
4.1.2 Location and store formats. IKEA stores in China are located closer to the city
centre than stores in other parts of the world, which are usually located well outside
city centres. A location a long way from the city would not be ideal in China, as
consumers do not have access to cars like they do in Europe and the USA. In China, the
stores have to be where public transportation can take people and where there is some
kind of hub through which many people pass. A good example is the Shanghai store,
which is very close to several bus lines and one of the city’s metro lines. However,
IKEA has still built 700 parking places under the Shanghai store, so there is obviously
an expectation that Chinese shopping patterns will change in the future, with more
customers coming by private car.
Public transport to the store is a contributing factor to the service level: home delivery
services are more common and used more frequently in China (which is also available in
other countries). Another, very overt difference, between the stores in China and in other
countries, is the array of entrepreneurs that have set-up home-transport services for
IKEA customers along with home assistance in assembling the IKEA furniture.
In the new Beijing store – the largest IKEA store outside Sweden, interesting
adjustments have been made to the store format. The store has wider aisles to cater for
the high volume of shoppers – China has up to three times more visitors than any other
IKEA store elsewhere in the world (The Wall Street Journal, 2006). The big-box format,
which IKEA uses, is unusual in China where traditionally, shopping is done locally and
at specialist stores. Hence, shops are smaller and locally oriented.
4.1.3 Advertising and promotion. In China, one of the big differences with the rest of
the world is in relation to communication with the consumer and reliance on the
catalogue. In China, it is impossible to distribute the catalogue in the same way as it is
distributed in other countries – at a similar cost or reaching the same audience
numbers. In China, the catalogue is only distributed in the store and in some of the
primary market areas. The stores rely on smaller brochures that are sent out several
times during the year. Staff at the entrance of the stores also hand them out. These
brochures are produced in-house and by the same printer in Älmhult, Sweden that
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14. produces the larger catalogue, in order that they have the same IKEA layout and
design.
IKEA has run many different advertisements in China, on television, in newspapers
and in print. Themes in the campaigns are the same as everywhere in the world but
with a Chinese “twist” (be different and break tradition). It is suggested that maybe the
Chinese advertising line is a little “softer” than in other countries, like in the UK; its
promotions have a more humble feel to them, they do not shock, they provide friendly,
home furnishing solutions, which can educate the consumer, offering home-furnishing
partnership solutions for the future. The advertisement featured below is typical
(Plate 1).
The message of the advertisement is “Small changes, a refreshing new life”
suggests that life can be made better, easier and nicer with small improvements and at
little cost. Small changes are the key words in IKEA’s in-store marketing. Another
advertisement, which IKEA ran, had the theme of “do not be like your parents”, a theme
that seems to speak directly to IKEA’s target group of young women 25-35 years olds
(Lewis, 2005).
It can be argued that the websites of the different stores in China are important: the
Internet is a common source of information for the target group, the younger
middle-class. Also, this source is used as a way to educate customers about the IKEA
concept and to prepare them for the shopping experience before coming to the IKEA
stores (see below).
IKEA is known for its “out-of-the-box” thinking when it comes to creating interest in
its brand and products. IKEA in China is no exception. IKEA is supposed to have started
or sponsored a television show where the viewers are offered lessons in home decorating.
Another example of public relations (PR) activity is when, a couple of years ago, IKEA
furnished the interior of 20 elevators in less affluent, residential districts in Beijing, using
IKEA products alone. They wanted to convey the idea of a nice environment in a dull
place, so reaching untapped markets, creating the idea: “change is easy”. PR activities
are also important to IKEA; the company took Chinese journalists to Sweden and taught
them about Sweden, IKEA and the roots of the company.
Plate 1.
IKEA print advertisement
in China
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15. 4.1.4 The selling environment and service levels. While the products available in the
Chinese stores are basically the same as in any IKEA store in the world, the stores do
not look the same inside. What IKEA tries to do is to build the room settings not like in
the USA, not like in the UK or Sweden but in a way that feels relevant to Chinese
customers, with sizes of rooms and kitchens that are realistic by Chinese standards. So
even with the same products, the aim is to make the store in Shanghai look very
different from the one in Malmö by using the set-up of the rooms. Thus, there is still the
same product range but adapted in each store through the presentation of goods and
home solutions offered. In China the store layouts reflect the layout of many Chinese
apartments – an example being the balconies, as mentioned earlier.
In China, the overall the shopping experience is different. Chinese consumers not
only use a shop to purchase needed products, but also they use it as a social venue,
which is a slightly different experience from shopping in Europe or the USA. Initially,
Chinese people did not go to IKEA to shop but instead they went to socialise in a
pleasant environment (which is unlike other furnishing shops in China, where you are
not allowed to feel and touch the merchandise). This is still true – people in the
Shanghai store can be seen apparently sleeping in the beds and on the sofas and
reading a book with their feet on the tables – but IKEA tries to ignore this, hoping that
the same people will later return as customers.
The Beijing store is expected to take 20,000 visitors a day and at weekends, crowds
are so big that staff need to use megaphones to keep control. The 20,000 visitors a day
adds up to some six million visitors each year. This is to be compared with two million
visitors, which is the average number of visitors to a non-Chinese IKEA store per year.
As the staffing level is the same as at other IKEA stores around the world, there are, of
course, consequences to this service level.
After identifying the large number of people that visit the stores in China, it is no
wonder satisfaction levels were down. In 2007/2008, overall satisfaction in China was
argued to be equal to satisfaction levels in the rest of the world, despite a lower score in
relation to some aspects for example, inspiration, waiting times and helpfulness of
staff. The big-box format that IKEA uses is unusual in China, where traditionally,
shopping is done locally and at specialist stores. Hence, the IKEA shops are smaller
and have a friendly, local atmosphere. However, the self-service concept is not so
comfortable for Chinese shoppers, where customers have to visit a warehouse to pick
up their purchases and then assemble them at home. China does not have a DIY
culture. To try to explain and justify the DIY concept – which is at the heart of the
IKEA concept – is thus hard work in China. IKEA provides home delivery – long and
short distances – as well as an assembly service, for a small fee (home delivery short
haul for RMB 50 and assembly of one piece RMB 40). IKEA has also unintentionally
created an industry around itself – of delivery drivers that help assemble the IKEA
furniture. These pick-up trucks with drivers are lined up outside the stores.
IKEA tries to acknowledge these issues and provides information in the stores, on
the web site and in the catalogue, to prepare the Chinese consumer for the IKEA
experience. They even have shopping hostesses walking around the store explaining to
customers how the concept works; and IKEA representatives argue that it is slowly
progressing.
Studies by Edvardsson and Enquist (2002) and Edvardsson et al. (2006) have shown
how important the service culture of IKEA is to drive service strategy and to achieve
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16. market and business success. Here, service culture is related to developing a culture
around the interactive parts of marketing (service encounters). Thus, implementation
of the service culture of IKEA is important to fulfil the IKEA concept. And how does
this work at IKEA in China?
As indicated above, consumers in China are demanding when it comes to service.
They are used to a high-quality service, where there are people to help with all kinds of
tasks. The self service and DIY concepts of IKEA are hard for Chinese people to accept.
So, are there other service-level issues that are difficult to accept?
In China, IKEA tries to implement a staff strategy that makes everybody
co-workers rather than traditional employees. However, it might be contrary to what is
more common in China, where workplaces have a stricter and more formal hierarchical
work structure with supervisors telling employees what to do. IKEA argues that
focusing on creating co-workers creates more responsibility, which in turn should
create a more service-oriented environment. There is little valid data available on
whether this actually happens (IKEA uses mystery shoppers but this more-general
data cannot be appropriately used here).
IKEA has another challenge that affects service and that is the fact that many
products – despite increased sourcing in China – have huge lead times, in terms of
shipping from Europe and other sourcing markets, to China. This has historically
made it necessary for Chinese stores to promote and sell what they have currently got
in the store rather than promote products that are advertised in the catalogue. Owing to
much effort to improve this situation, like increasing domestic production and building
a new warehouse in China, availability in China is almost the same as for the rest of the
IKEA group.
4.2 Standardisation or adaptation?
In Table I, we attempt to compare IKEA China to IKEA elsewhere in the world in
relation to the four different dimensions of retailer marketing strategies that we have
investigated. As the comparison is done on a general level – China versus the rest of
the world – it lacks detail but is, even so, considered to give a good overall picture of
how marketing strategies in China differ to the general IKEA marketing guidelines.
Table I shows that IKEA has made changes in its marketing activities in relation to
the Chinese market. Prices of merchandise have been cut, based on a new supply chain
just for China. Location is different and store format is also different, to some extent.
Advertising and promotion is quite different with much less emphasis on the
catalogue. Selling environment and service are aspects of the strategy where less
adjustment has been made. Compared to Figure 1 (the triangle), adjustments are made
on each level, from the top to the bottom. Compared to their own ideal, IKEA’s
strategies in China are different from elsewhere in the world.
It is argued that from the consumers’ point of view, the IKEA experience must be
different from IKEA in, say, Sweden. Prior to a store visit, customers in China can
only experience IKEA via advertisements and not via the catalogue. The visit to the
store is also different; there are more customers, a lower level of service and a slightly
different environment. In relation to culture and other competitors, it is proposed that
IKEA’s consumer image must be quite different because it is based on other product
sources and adapted strategies and, in turn, the customer responds to all the
adaptations.
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17. 5. Summary and conclusions
IKEA has often been seen as a model of standardisation among retailers. It is argued
that the company implements a standardised concept of home furnishing retailing
around the world with the same type of stores, which are located in similar places; and
the same assortment of products with a focus on price and DIY. IKEA’s success around
the world is phenomenal, however, until 1998, most of that success came from markets
in Western Europe and the USA, i.e. from markets similar to the home market of
Sweden where the concept was developed. Markets in Asia are new challenges,
different in many respects from the markets where IKEA has enjoyed so much success.
So, does implementing a standardised business concept on an alien market work?
It is clear that IKEA has had to adjust and work harder in China than in other
markets with some of its basic principles. Keeping the price low is one of the
cornerstones of the IKEA concept. IKEA prices, compared to alternatives for Chinese
consumers, are not low but high, offering their products to fewer rather than to more
people. IKEA China has had to drop some of its basic principles – a centralised source
and supply chain – to be able to develop its business and reduce prices in order to
compete. Adjustments in IKEA’s marketing strategies can also be seen in relation to
IKEA in China IKEA elsewhere in the world
Merchandise Brand name is IKEA Basically same
products (95 per cent)
Increasingly local sourcing for all
products in the assortment
Cutting prices dramatically
Brand name is IKEA Basically same
products (95 per cent)
Increasing local sourcing on few
markets (Russia), otherwise
centralised sourcing and supply
Cutting prices in all countries
Location and store
format
Location closer to city centre, closer
to public transport, etc.
Two floors, underground parking,
restaurant, Sweden shop, wider
aisles in store
Location in most cases well out of
city centre, out of town location
(adjusted for car use)
Two floors, parking outside store,
restaurant, Sweden shop
Advertising and
promotion
Catalogue is minor part, adjusted
(smaller) brochures are the concept,
advertising to fit the IKEA concept
to local tastes, culture and position;
promotion increasingly run from
stores, IKEA family is rolled out
2008 in China, web is a tool that
provides opportunity to increase
knowledge of IKEA concept to new
IKEA customers
Catalogue is the base, advertising to
fit the IKEA concept to local tastes,
culture and position, promotion
increasingly run from stores, IKEA
family is rolled out across countries,
web is a tool that increasingly is
used on new markets as information
tool to increase knowledge of IKEA
concept to new IKEA customers
The selling environment
and service
The room settings are adjusted to fit
with local tastes, size of rooms, etc.
of Chinese customers
More visitors than in other IKEA
stores in the world – with the same
staff level DIY, etc. concept is alien
in a country were labour is less
expensive – with prices that are not
perceived as generally low.
The room settings are adjusted to fit
with local tastes, size of rooms, etc.
of customers in countries where
IKEA works
DIY, etc. concept of IKEA is
increasingly accepted – the DIY,
etc. is the “price” you pay for low
prices
Table I.
Comparing IKEA in
China to IKEA elsewhere
in the world
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18. location and communication (advertising and promotion) to respond to the
characteristics of the Chinese market. The adjustments are indeed more substantial
compared to other markets. The selling environment and service levels have not been
substantially changed compared to other places. Rather, changes have been made to
other aspects of the marketing strategy, i.e. offering a home delivery and assembly
service. But it is clear that the perception of the IKEA store and service is different.
Some aspects of what IKEA offers in China are alien to many Chinese people due to the
high prices, the DIY element and the low-service levels. However, the IKEA brand and
products are unique and give Chinese consumers a product offering that is unlike
anything else on the market. It is clear that to IKEA in China, it has not been enough to
only be attractive to a small, fairly well off-target group. Adjustments have been made
with the aim of being able to attract more consumers to the stores and not just those
with higher incomes; and this new consumer group is not the traditional IKEA
customer.
From an IKEA perspective, China has been a practical trial for its business concept.
To some extent the jury is still out as to whether or not it has been a success; but IKEA
argues that the “worst” part of the China experience is over. IKEA has learnt many
things in China and many of these lessons will be useful in other markets around the
world. One lesson for IKEA – according to senior managers at IKEA, is the fact that in
order to succeed in the Chinese market, it has not been able to rigidly cling to its
conventionally-successful business concept and marketing strategies. While keeping
some areas unchanged – assortment, brand name, overall communication, store
concept, etc. – IKEA has been able and forced to adjust some other elements of its
service to be relevant to this new market. Without radically adjusting prices and
changing sourcing and communication, it might have been another story. From an
IKEA point of view, another lesson learnt is that a business cannot achieve the same
results with the same tools on all markets. Adjustments have to be made with special
markets. In light of all the adjustments being made in China, is IKEA still true to its
business concept? IKEA argues that it is, except it has to change the ways of
implementing its business concept. In terms of consumer image it is doubtful, because
there is still a long way to go to attracting the many potential consumers in China and
in getting them to understand the DIY concept – that doing work yourself can save
money (especially when the price is still perceived as high).
From a general retail standardisation and adaptation perspective, the IKEA case is
one of implementing a standardised concept on a new and very different market. IKEA
seems to have made fewer adaptations than some other retailers from Europe (Carrefour,
B&Q, etc.). But is the marketing strategy of IKEA standardised or adapted? The actual
implementation of the IKEA concept in China has meant changes in a standardised
approach in almost all areas. Some of these changes are what international marketing
literature would predict, for example, concerning advertising and promotion (Usunier
and Lee, 2005). In other research, this is the part of the marketing mix that any company
that is going international would adopt the most. For IKEA China, the major marketing
tool – the catalogue – was dropped in order to adapt to national conditions. It confirms
what earlier literature has shown, i.e. that there are limits to how far a business can go in
standardisation. It may also show that a high level of standardisation is possible on
markets similar to the domestic one but in markets with different conditions,
even standardised concepts must be changed in order to be attractive.
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19. Compared with earlier studies of retail internationalisation and the issue of
standardisation versus adaptation, this study involved more detailed and up-to-date
data concerning a true international retailer. This information provided a more detailed
picture of the standardised retailer, IKEA.
Another interesting aspect about IKEA in China concerns consumer image. This
study confirms some of the results from other studies (Burt and Carralero-Encinas,
2000; Burt and Mavromatis, 2006) that the consumer image is relative to context. As for
implementing Marks & Spencer – unchanged to the Spanish market – the image of
Spanish customers is not the same as those of UK customers. In order to create the
same image of IKEA in China as in the USA or Europe, standardised marketing
activities will not be enough. Accordingly, the focus for marketing activities in China
will focus on culture-specific aspects. This means that the IKEA concept is a
standardised one but the strategies and the marketing activities to realise the
standardised concept may indeed have to be adjusted to local marketing conditions.
Even with this in mind, the creation of a similar image around the world may be an
unrealistic ambition. Many impressions, which stem from a variety of sources, shape
the consumer image and only a few of them can be controlled by the retail company
and even if they are controlled and standardised, they are interpreted by consumers in
ways that are difficult to control and foresee.
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Corresponding author
Åsa Thelander can be contacted at: asa.thelander@iks.lu.se
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