IKEA, the Swedish furniture producer, will open its biggest Asian store in Shanghai in less than two months. This is the most significant event since IKEA arrived in China five years ago.
IKEA's aggressive plan also includes another 10-plus stores around China by the end of 2010, according to Garth Collins, head of the new construction project.
After almost one year of construction, the new store will be opened in the first week of April. Covering 33,000 square metres of business area and 800 square metres of underground parking space, the two-storey store, which is four times bigger than the old one on Longhua Xilu, is expected to also bring sales at least four times greater than the previous store, according to the manager.
Located on Caoxi Lu, which is very near to Shanghai Stadium, the new store, in typical IKEA style, will provide about 8,000 articles, twice the number of the old store.
The new store also boasts a big restaurant with 500 seats providing Swedish food, a cafe and over 50 room settings which provide solutions for local people wanting to decorate their homes.
For a long time, Chinese people have been used to buying local style furniture. A few wealthy people would buy luxury furniture in a Western style from abroad, treating it as a symbol of status and fortune.
But IKEA, with its simple but practical and fashionable designs, seems set on changing people's minds. The new arrival from northern Europe won people's favour almost immediately.
During the early days of its operation in 1998, customers thronged into the store. Intensely curious, they would touch everything and praised every kitchen article or colourful sofa.
Having a set of IKEA furniture became the dream of modern couples, associated with fashion, comfort and taste.
Cautious solution
Despite such a good beginning, IKEA has been quite slow in pursuing its path to expansion.
Compared with other foreign retailers, such as Carrefour and Walmart, who have expanded rapidly around China, IKEA has seemed very cautious.
During the last five years, IKEA has opened only two outlets, one in Shanghai and the other in Beijing.
"IKEA is not just a warehouse, we try to provide more solutions helping people decorate their homes instead of just providing products," Collins said. "Before we open more stores, lots of investigation into the locality, the size of the city and people's shopping experience has to be done, which takes lots of time and money."
To prepare for the new store, IKEA has made hundreds of home visits with the aim of finding out how local people live and how they decorate their homes. "We just try to get a feeling before making a decision," he said.
Now IKEA seems to being moving forward decisively in its expansion plans, with the opening of the huge new store in Shanghai. By the end of 2010, IKEA has plans for at least 10 stores in Pudong, Beijing, Guangzhou and Shenzhen, of Guangdong Province. The company plans to be operating profitably by 2006.
Copycats
To attract more customers, IKEA is taking a familiar approach - lower prices.
In the local market, IKEA's price is higher than the average. So some shrewd people, who love IKEA's design but have less money, bring carpenters to the store and copy their style. Then the carpenter makes pirated IKEA furniture at their home.
"It honours us to see such copycats," Collins joked. "But if you say IKEA is expensive, I would have agreed four years ago, but now, I think IKEA's price is affordable to most people."
Collins takes one example. A sofa which was priced at 7,500 yuan (US$905) originally now costs just 1,500 yuan (US$180).
The drop in price can be attributed to the localization of production. When IKEA first came to China, most articles were imported from abroad. Another important factor is the decrease in duties, according to the manager.
"According to the IKEA philosophy, IKEA is not for the rich, it aims to improve the life of ordinary people," Collins said.
(Shanghai Star February 14, 2003)
