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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Trade under threat of Fukushima fallout - Shaun Rein

Toyota SUV in trouble via Wikipedia

The effects on trade between Japan and China cause by the Fukushima nuclear disaster is bigger than expected, warns Shaun Rein at CNBC, as Chinese consumers not only stop buying Japanese food, but Japanese products like Toyota's SUV cannot reach the Chinese market.
Rein is bullish on the home decoration market, where he expects this year a growth of 15 percent, as Chinese home owners turn to renovation as the sales of residential real estate slows down. Unfortunately, the foreign retailers like B&Q, Home Depot, but surprisingly also IKEA fail to capture that momentum.

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

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Home Depot loses, IKEA wins; why? - Helen Wang

Image by Getty Images via @daylife

Home Depot announced the closure of outlets, a stiff reminder that life can be tough, even in a fast growing Chinese market. But what is IKEA doing better, wonders Helen Wang in Forbes, as they announced the opening of more outlets. What lessons can be learned?

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...

Three lessons Helen Wang has:

Helen Wang via Flickr
• 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.

More in Forbes.

Helen Wang is a speaker at the China Speakers Bureau. When you need her at your meeting or conference, do get in touch.

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