IKEA succeeds in global expansion

IKEA: the world’s leading furniture retailer since 2008.  IKEA was founded roughly 75 years ago as a mail-ordering business, but quickly became a European staple for furniture.  Mainly known for affordable home décor and furniture, IKEA incorporates quality, sustainability, and functionality in all their products.  As of November 2018, IKEA operates in 52 countries with 424 stores.  IKEA caters to customers by creating stores that fit the needs of the current culture.  But how was IKEA able to expand in various markets with different societies and tastes?  The expansions did not always come easy, but IKEA has mastered most of the process.  IKEA has expanded into large markets like China and most recently, India.

BEFORE EXPANSION

Before IKEA expands to a new market, IKEA hires a team of ethnographers, who analyze a market’s household culture and typical furnishings.  The ethnographers use various tools such as interviews, review boards, and home visits.  These tools move forward the development of new products and help IKEA’s creators with content planning and design.  Content planning also includes designing local editions of IKEA’s yearly catalogs.  When IKEA first entered the US market, IKEA could not replicate everything from the European business model.  For example, in the US, most customers enjoy large beds and closets, which differ from majority of Europeans.  Most of IKEA’s product changes are subtle from market to market, like size or extra decoration on certain objects such as decorative trim on doors. IKEA always takes into account customer preferences in for expansions to be successful.  This is easier said than done.

EXPANSION IN CHINA

IKEA expanded into China in the late 90s.  After realizing weaknesses from expanding into the US, IKEA knew China would be a much bigger challenge.  Similar to Europe, IKEA knew that Chinese apartments were small and compact, but the furniture needed to be flexible.  For example, US kitchens are much larger than kitchens in China.  The IKEA catalog creators cropped photographs from the US catalog for the China catalog in order for the kitchen to look smaller and more confined.  IKEA needed to be mindful of style but also with pricing.  China boasts plenty of cheap alternatives for almost everything.  Due to these low-cost alternatives, IKEA reduced prices almost 30-50%.  IKEA also faced copycats in China.  IKEA noticed as they published their yearly catalog to the Chinese market, copycats were recreating the furniture for lower prices, again challenging IKEA’s products.  Lastly, IKEA learned that the Chinese did not appreciate the self-building concept of IKEA furniture.  This was something to take into consideration as IKEA launched into India’s market.

EXPANSION IN INDIA

IKEA’s expansion into India has been their newest venture.  Even though IKEA opened their first store in India last year, IKEA has been sourcing products from India for 30 years.  IKEA aims to have 25 stores throughout India by 2025.  The next storefront will be opening in Mumbai this summer.  Just like the China, India did not appreciate the self-building concept of IKEA.  In India, IKEA has a certain percent of the workforce at each store is assigned to assembling the furniture.  IKEA also outsources furniture assembly to contractors.  IKEA paid extra close attention to India’s lower income levels and because of that, the store features hundreds of products priced at less than 100 rupees, which is under 2 USD.  A noteworthy product that was modified for India were cabinets.  Indian women on average are shorter than European women, so IKEA deliberately displayed cabinets lower in height in their showroom.  Wood materials were also modified in India.  IKEA typically uses pine, but since much of India is in a tropical climate, pine wasn’t a good long-term option. With more storefronts coming to India in the future, IKEA must continue to be proactive in making positive changes.

FUTURE EXPANSION

All in all, IKEA has managed to embrace different cultures and actually see priorities of customers.  IKEA wants to benefit customers first, before benefitting themselves.  “We knew from the beginning that we cannot be arrogant and try to copy and paste,” Juvencio Maetzu, Ikea’s deputy CEO and chief financial officer, told CNNMoney.  “We really put a lot of effort into listening and understanding.”  IKEA’s business model reaffirms potential success as they enter more markets across the globe.  I’m excited to see what the future brings for IKEA as they continue expansion in India, as well as looking ahead with future expansion in South America.  With sales continuing to boom for the Swedish company, I anticipate IKEA is here to stay.

Written by Kathleen Moises