Recently, Ikea Group, the world's largest home furnishing retailer, plans to increase its number of stores in the Chinese market by four times, hoping to expand the Chinese market into the company's second largest market. While aggressively entering the Chinese market, IKEA suffered from "growth."
IKEA CEO Mikael Ohlsson said in a speech that IKEA plans to open new stores in Shanghai, Beijing, Ningbo and Chongqing. Mikael Ohlsson also said that China will soon become the second largest market for IKEA and may become the largest market in the long run. Mikael Ohlsson said the company currently has 11 stores in China and hopes to add five stores. By 2020, IKEA hopes to expand the total number of stores in Huamen to 40.
Bloomberg said IKEA is looking to expand in high-growth emerging markets to offset its dependence on Europe since the recession. According to data released by IKEA's official website, by August 2012, IKEA had 338 stores, of which 245 were in Europe. At the same time, IKEA also hopes to open more stores in Russia this year.
20% of sales in China and 4 times more planned stores
In the global map of IKEA, sales growth in the Chinese market is bright. According to data released by IKEA China, in FY2012 (data as of August 19, 2012), IKEA China's sales exceeded RMB 5.4 billion, an increase of 21% over the previous fiscal year. Based on this calculation, IKEA China's sales accounted for 20% of global sales. However, IKEA did not disclose the profit data of IKEA China.
According to IKEA, Mikael Ohlsson, president and CEO of the group, said that IKEA's fastest growth in the global market is China, Russia and Poland, followed by the United States and Germany.
However, IKEA's same-store sales are also facing decline as giants such as Home Depot and B&Q experience or exit the Chinese market or decline in performance. According to IKEA, sales of existing stores in FY12 increased by 4.6%. According to the data, IKEA same-store sales increased by 7% in the fiscal year ended August 31, 2011. According to foreign media reports, Ohlsson expects sales of the IKEA Group to increase by about 5% year-on-year in the next few years.
Ten years of price cuts over 20%
In addition, it is worth noting that IKEA's net profit for the fiscal year 2012 increased by 8%, compared to 10.3% in the previous fiscal year. According to IKEA, the average price of IKEA products in the fiscal year 2012 was 0.8%. In the previous fiscal year, IKEA cut the average price by 2.6% per year. In addition, IKEA claims that IKEA products have fallen by more than 20% in the past decade.
It is understood that since 2002, IKEA has substantially reduced the price of commodities, and the average price of its products has fallen by 31% in the following three years. In 2005, the average price of its original 7,000 products fell by an average of 14%. In 2007, as IKEA continued to improve its procurement system, some of its products fell by as much as 50%. Based on IKEA's annual price cuts, IKEA's product prices have fallen by more than 60% compared to the original. Behind the low price is the pressure of cost control.
However, in order to pursue the ultimate "low-price strategy", IKEA has not only let the foundry suffer, but finally chose to flee, which also led to the quality problems of IKEA products frequently exposed. Because IKEA's price is very low, and many factories are facing various rising costs, they can only "make a fuss" on materials. "There are people in the industry who say that the quality of IKEA products is not good in the industry.
According to industry experts, the price of IKEA products has dropped significantly over the years, mainly due to the expansion of sales networks and close cooperation with suppliers. These two factors will also continue to allow IKEA to adjust prices to provide consumers with fully functional and reasonably priced products. Indeed, unlike Home Depot's withdrawal from the Chinese market due to acclimatization, IKEA can adapt to the Chinese market, mainly because of its cost control strategy.
Since 1998, when IKEA entered China, it has set off a “IKEA†whirlwind in China. “IKEA†means “grade†in the petty bourgeoisie. If IKEA is blindly advancing, it is bound to embark on the road to death.
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