consumers spend their money wisely, and ikea feels the pain｜interview with haibin
2024-09-28
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ikea opens a new store in china.
on september 26, 2024, ikea shanghai linkong mall opened, which shows that it has gradually regained its confidence in the consumer market. in the past few years, ikea's development in china has not been smooth. it has closed several shopping malls in guiyang, shanghai and other places. consumers are more inclined to spend their money on the edge of the knife. ikea has experienced the pain of cutting flesh with the knife edge. the situation for china's listed home furnishing companies is even bleaker. red star macalline, gujia home furnishing, etc. have all experienced sharp declines in revenue and profits, and even the control of the company has changed hands.
ikea tries to use low prices and lower prices to attract consumers into the mall. however, the recovery of consumption is a gradual process, and ikea has lowered its growth expectations. "as long as positive growth is achieved, it is actually a victory, isn't it?" shen jingfen, general manager of ikea's shanghai region, told china business news.
on and off
shanghai has always been a battleground for multinational companies, and the same is true for ikea, which started in a small swedish town and grew into a global enterprise.
ikea's linkong mall has 800,000 consumer residents and 140,000 working people near the business district. most of these workers are single young white-collar workers and young couples who have just started families. they have considerable purchasing power and home storage needs.
after the opening of linkong mall, the number of ikea stores in shanghai increased to four. shanghai is the chinese city with the largest number of ikea stores. in addition to linkong mall, it also includes baoshan mall, beicai mall in pudong, and xuhui mall.
correspondingly, in beijing, another super city in china, ikea only has xihongmen mall, beijing siyuanqiao mall and beijing wukesong experience center.
"shanghai is currently the first city in mainland china where ikea has achieved four stores in one city. of course, this is also because we have very different positioning and expectations for the shanghai market." shen jingfen said. she previously worked at the ikea hangzhou store and had only been in her new position in shanghai for one year.
ikea had a failed experience in shanghai before. it opened its first city store in the chinese market in shanghai in 2020 - ikea shanghai jing'an city store, located in the prosperous commercial jing'an district. however, this store proved to be inconsistent with the business district, and it closed the jing'an store in 2023.
ikea's misjudgment of the shopping district's consumption power also occurred in guiyang.
in 2022, ikea closed its offline store in guiyang city, guizhou province. at that time, it was only three years before its store officially opened. this is the first time ikea has closed a store in china.
since then, ikea’s expansion trajectory in china has undergone fundamental changes. between 2014 and 2021, it will open at least two new shopping malls in the chinese market every year, and in 2022 it will open only one shopping mall. in 2022, there will be 34 ikea stores in china, shrinking for the first time. in 2023, ikea will not open a new store in china for the first time in ten years. so far, ikea has opened 39 ikea customer contact points in mainland china (including 36 shopping malls, 2 experience stores, and 1 design ordering center).
"we used to hope that through continuous pilots and innovations, we would try to find more consumer contact points that are easier for consumers to reach, whether online or offline." shen jingfen said that the customer groups in different business districts are very different. consumers’ spending habits vary greatly. there are also many commercial complexes and retail brands in shanghai, and competition is fierce. if we can learn anything from past failures, “only by taking root in your own business district, truly getting close to the needs, and constantly improving your emotional connection with customers in the business district. in the whole process, the most important thing is one experience is that you must continue to work hard in your own business district.”
baoshan mall is ikea's largest mall in shanghai. across hutai road is the store of the popular home furnishing brand macalline. the current situation of red star macalline can better reflect the current dilemma of home consumption.
as of the end of june 2024, red star macalline operates 85 self-operated shopping malls, 267 managed shopping malls with different management depths, and operates 7 home furnishing shopping malls through strategic cooperation. in addition, the company has also authorized 49 franchised home building materials projects in the form of franchising, including a total of 439 home building materials stores/industrial streets.
in the first half of the year, red star macalline opened a new self-operated shopping mall in chengdu, sichuan, but closed three shopping malls in xiamen, fujian, tangshan, hebei and yangquan, shanxi. the revenue of red star macalline's self-operated shopping malls in 10 regions including beijing, shanghai, tianjin, northeast china, and south china all declined, and no region achieved growth. as a result, the overall revenue of red star macalline's self-operated shopping malls fell 15.3% year-on-year to 2.96 billion yuan.
low price, lower price
the epidemic once widened the distance between ikea and consumers.
after the epidemic ended, consumers’ purchasing power did not recover quickly. as rigid expenses such as food and education are difficult to compress, they have postponed the consumption of some household products.
what has a more profound impact on companies such as red star macalline and ikea is the long-term difficulties in the real estate market. consumer spending on home furnishings, home appliances, etc. is strongly related to the sales area of real estate.
data from the national bureau of statistics show that in 2023, china's commercial housing sales area will be 1,117.35 million square meters, a decrease of 8.5% from 2022, of which residential sales area will decrease by 8.2%; from january to august 2024, the sales area of newly built commercial housing will be 606.02 million square meters , a year-on-year decrease of 18%, of which residential sales area decreased by 20.4%.
if there is no demand for house decoration, consumers' demand for home furnishings will naturally shrink.
"we also understand the changes in visitors. nowadays, consumers are keeping their wallets tight. people will be more cautious about consumption." shen jingfen told reporters, "how can we spend this money better?" , has become the focus of consumers’ attention.”
the move ikea took was to cut prices.
globally, ikea is opening up the market with low-price products. in the current sluggish consumption situation, ikea has further reduced product selling prices by reducing procurement, logistics and other costs in the industrial chain. products targeted at consumers’ daily high-frequency use. ikea launched a lower-priced product line in fiscal year 2024 (september 2023-august 2024); in fiscal year 2025, it continued this strategy.
"we very much hope to see visitors coming to the store. this is the basis that needs to be maintained." relying on the low-price strategy, ikea has temporarily stabilized customer flow. according to shen jingfen, ikea’s three offline stores in shanghai all achieved positive growth in visitors last year year-on-year.
"we were very happy during the summer vacation from july, august to september this year. because during the entire summer vacation, our store ushered in a peak number of visitors and achieved positive growth in total visitors," she said. "in the current environment, as long as we achieve positive growth, it is actually a victory, right?"
whether this trend of visitor recovery can continue and whether customer consumption can grow depends in part on the effectiveness of current economic policies.
recently, policymakers have launched a series of stimulating policies, among which the trade-in of consumer goods has driven a wave of sales growth of home appliances. lowering loan interest rates for newly sold and existing second-hand houses is expected to invigorate transactions in the real estate market and further boost household consumption.
(this article comes from china business news)
