IKEA's China problem: too popular - Shaun Rein

Image by Getty Images via @daylife

The Swedish furniture retailer IKEA has become a public attraction comparable to Disneyland in the small number of stores they have in China, writes Shaun Rein on the CNBC website. When you are too popular as a foreign brand, it is not only good news.

Consumers check out displays to get ideas on how to decorate homes. Some even nap on beds. Families buy 25-cent hot dogs while kids play in the clean and air-conditioned environment. IKEA has become a mini Disneyland for cash-starved Chinese...

And what is worse: they are not buying.

Many consumers flocking their aisles cannot afford fat margin furniture items. Instead they take photos, or even grab IKEA catalogs, and copy products at cheap custom furniture stores. If they do spend, they buy dollar bathmats and drinking glasses. IKEA now sells coffee tables that cost less than a Starbucks latte.

Image by Fantake via Flickr

Basing a sales growth model on discounting and cheap products is not a viable long-term strategy. Several hundred upper middle class consumers told my firm in interviews they are put off by IKEA’s large crowds and cheap prices. In other words, IKEA is too expensive for the majority of consumers, but too cheap for real spenders.

But IKEA is adopting its strategy, and perhaps not making much money on furniture, but in other ways, Rein argues.

More at CNBC.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your conference or meeting? Do get in touch.

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