IKEA has finally taken this step.
At the end of October 2018, IKEA China expanded its online shopping to 149 cities. This figure happens to be the future coverage set by the Swedish giant at the beginning of its entry into China 20 years ago; on November 1, IKEA China’s first downtown experience store landed in Beijing Wukesong.
From the physical store model to the mass promotion of E-Commerce, IKEA was late for a full decade. In 2008, the E-Commerce business was first put on the agenda by IKEA. The 82-year-old IKEA founder Ingvar Kamprad wrote in a reply rejecting the operation of E-Commerce, that E-Commerce transactions will reduce the number of guests coming to the store, leading to IKEA. Lose some extra business. That year, Tmall was just launched as part of Taobao, and “Double 11” has not yet been planned.
Behind the curve dream, IKEA and E-Commerce are two parallel lines, each reaching a glory and then falling into a stagnant decade. E-Commerce faces the bottleneck of traffic and turns to the new retail concept to seek new life offline; IKEA China has turned around and started to E-Commerce exploration with Shanghai as a pilot after the growth momentum has slowed down.
Despite the same goal, they are all moving closer to online and offline integration, but it is hard for IKEA to avoid it. Why is it ten years late? Is it a “new retail” textbook or a “trouble”?
New look
On the first day of November, IKEA opened its experience center in Wukesong, West Beijing. The last time it gathered a large number of media, it was in March 2017, when it was the second pick-up center set up by IKEA in China.
Anna Maria Paulak-Kuliga, the new president of IKEA Retail China, also appeared in the media for the first time. In her less than 5 minutes of speech, this small store with only 1/10 of the IKEA general store was given. The extraordinary meaning represents the beginning of “a new era” and is the first step of IKEA’s “in-line and offline integration.”
The 75-year-old home retail giant does have a new look.
From the delivery center to the experience center, the difference between the two words, IKEA changed more than just the door. This is IKEA’s first downtown business model in China. Compared with the renovation, the sales area has increased by nearly 50%. While enhancing the experience, its storage function has been greatly divested, and new tableware and food areas have been set up. Children’s playground and home design area. It even made changes to the IKEA traditional self-raising method. Most of the goods could not be picked up on site, and will be delivered from the Tianjin Central Distribution Center and delivered to the door through third-party logistics.
The pace of IKEA China is accelerating. In the next year, IKEA China will open six shopping malls, double the speed of opening stores from 2012 to 2017. Considering that this Nordic giant has always bought its own land, the single store has an area of 35,000 square meters. Undoubtedly it is a big speed increase. The Wenzhou delivery center established two years ago and the experience center opened this time are all IKEA China’s exploration of reducing the burden of heavy assets and further increasing the speed of opening stores through the leased property model.
For E-Commerce, IKEA has also taken a cautious pilot attempt and became bold. From the IKEA fiscal year in August, it announced that it will cover 149 cities at the end of the year, and it will take only more than two months to complete the landing. The water is close to two years.
At the same time of acceleration, IKEA China also sought stability from the Nordic style and became fashionable. At the end of August, IKEA even cooperated with Wechat to open a flash shop with a small program.
These changes made Chen Lin (a pseudonym) unprepared. From the issuer’s purchase for ten years, Chen Lin’s stable income of 300,000 in 2018 comes from this well-known and limited-coverage home furnishing giant. What he needs to do is to circumvent between Taobao, IKEA and express dealers. For various reasons, it is impossible to get to the store’s consumer demand. However, after IKEA promoted online shopping, Chen Lin’s customers lost at least 60% in just a few days. After the inventory was light, he was determined to change careers.
For today’s situation, Chen Lin is a bit wrong, it is like a Tai Chi master, looking at the other side is not ill, but was hit by a backhand, actually a fatal. “The price of them is quite scary, 30 kilograms, we will cost at least 40 yuan regardless of the delivery, but IKEA only needs 9.9 yuan.” Chen Lin told the “Chinese entrepreneurs”, “IKEA is deliberately driving us. ”
Should not be. These more than 4,000 purchases were only accidentally injured by the energy released by IKEA for self-rescue. According to FY18 data, nearly 15.5 million fans contacted IKEA through different social platforms, compared with the same period in 2017, this data increased by 72%, while IKEA China’s performance growth is gradually weakening, and sales in FY20 are expected to increase year-on-year. Only 9.3%, exploring sales channels outside the physical store, turning idle network traffic into real orders, became the instinctive agent that IKEA found for itself.
In 2012, Ikea, who was obsessed with the founder’s warning and respected the E-Commerce, finally loosened its mouth and used the UK as the first E-Commerce test field. Until now, IKEA has already established E-Commerce business in more than 20 countries in the UK and Germany. In China, E-Commerce testing began in the second half of 2016 and was first opened in Shanghai. In addition, the E-Commerce business has also been tied to the IKEA chariot to 2020, in the overall sales target of 50 billion euros, online sales accounted for 10%, there are media calculations, which means that IKEA needs to maintain the total Sales increased by an average of 10% per year, and online growth exceeded 37.5%.
After two years of testing, IKEA China announced the Shanghai online shopping mall in the 2018 fiscal year (September 1, 2017 to August 30, 2018) results: received 7.8 million users, sales of more than 70 million yuan, compared 146 billion IKEA China’s total sales in FY 2018, whether the home appliance business should meet expectations, but also need to be different.
The Nordic giant, who has always been a maverick, is not willing to put his exploration into the somewhat fashionable words of “E-Commerce”. “Now where is the customer, where are you going?” Zhu Changlai, former president of IKEA Retail China As such, the more official statement is that IKEA is “changing from a company with only a store business to a multi-channel retailer”.
IKEA also provided an official explanation on why the process of accelerating the layout in the Chinese market has been provided. “The Chinese market is one of the fastest growing and most exciting markets in the world – urbanization, E-Commerce development, speed of technological innovation, etc., all leading the world. “Yan Fan, China’s public relations manager, told China Entrepreneur that “the change in consumers has prompted a change in IKEA.”
Cautious gene
Why did IKEA take this step later?
This may be related to IKEA’s cautious genes. To trace the roots of this temperament, we must talk about Ingvar Kamprad, the founder who died in January 2018. Stepping out of the barren ice sheet in the northwest of Stockholm, Sweden, Kamprad was cautious and even written into the IKEA Bible, a voucher of a furniture firm, and he cautioned that “the plan to make a step into the sky often leads to the company’s demise” .
From the purchase of self-built shopping malls to the large-scale implementation of online shopping, the transformation of IKEA can be understood in a sense to be a return, returning to its original form – mail order, by virtue of the “IKEA Shopping Guide” With a thin booklet, Ingvar Kamprad established this world-class retail giant with the help of his family. However, the decision to make a return is not easy. His concerns about E-Commerce squeezing offline business have left IKEA not always waiting to see E-Commerce.
Of course, in this industry that values the line, this kind of worry is not uncommon. On the eve of the “Double 11” in 2013, under the leadership of the Real Home and Red Star Macalline, 19 home furnishing stores across the country jointly launched a “blocking order” to prohibit merchants in the store from promoting “Double 11” activities and warned merchants, “Help Online distribution is for the sake of the small profits.
Former IKEA CEO Peter Agnieff Jevo once explained the choice of IKEA in an interview with Curiosity Daily. It is easy for IKEA to accelerate its expansion, but more important than rapid expansion is stable development. “From what we have, we must always guarantee this, and then we will make new ones.”
In the ranking of the importance of IKEA’s various businesses, the performance of existing stores is always ranked first. As Kamprad is concerned, after the E-Commerce business, online and offline businesses are likely to have problems with each other.
It is not difficult to understand that the consumption of large pieces of furniture is low frequency. The IKEA shopping malls are crowded all the year round, and they are inseparable from small items that are inexpensive and have a sense of design. This preference is clearly reflected in the price, the average unit price of IKEA. Only 140 yuan. However, these small items are also the main target of consumer online shopping. The data provided by Chen Lin is that among the IKEA products that online consumers choose to purchase, small items account for more than 80%. The data from other home brands also confirm this point. The solid wood furniture manufacturer Ximengbao is a global supplier of some solid wood furniture styles for IKEA. Its brand director Shuai Ningfeng told “Chinese Entrepreneur” that the online average single value is only It is 1/4 of the line.
The transformation line will also affect other IKEA businesses, such as the IKEA restaurant, where there are “IKEA Sambo” – Swedish meatballs, salmon and dollar ice cream, contributing to IKEA close to the annual battalion of Domino’s second largest pizza chain in the US. In 2015, IKEA Chinese restaurant sales reached 1 billion yuan and sold 6 million Swedish meatballs. Entering the line means that part of the restaurant revenue is abandoned. This decision is not easy.
What’s more, before this giant moves to the unknown battlefield, there are still too many questions to answer: relying on the traffic of its own website or using a third-party shopping platform? Do you invest heavily in the flow of your own logistics, or give up the control of the logistics chain and trust the third party? Want to profit or scale?
For example, the use of corrugated flat packaging, saving materials and transportation space, but only for IKEA own logistics after years of running-in, once the introduction of third-party logistics, just corrugated packaging is too fragile. Estimated by the handsome wind, plus the protection of the pearl cotton and foam, the packaging cost of IKEA products will increase by about 15%, the cost of logistics and on-site installation will increase by 10%, IKEA’s original system in transportation, on-site installation, etc. Weak, it takes a long time to make up classes.
The question is, even if the packaging cost is increased and the uncontrollable factor of third-party logistics is introduced, how can the experience be guaranteed? E-Commerce distribution has many links and long distances. It is difficult to identify which part of the problem has occurred. IKEA, which is known for its strict quality control, is not willing to bear the nickname for the mistakes of the partners.
Consumer acceptance of IKEA in second- and third-tier cities also needs to be considered. Chinese consumers who have been spoiled by Taobao and Jingdong’s service may be difficult to accept IKEA’s courier fee and DIY concept – when installing independently, only a small hex wrench is attached, the quantity is accurate to no more than one Screws. In this regard, IKEA has learned the lesson. When IKEA entered Japan in 1974, it was because local consumers did not accept the idea of self-installation.
I have been dealing with offline consumers for more than 70 years, but for online consumers’ preferences and problems, IKEA’s experience is almost zero. Yang Fan told China Entrepreneur that the Shanghai pilot has accumulated a lot of experience for IKEA in customer service, including what questions consumers will ask and how to respond quickly in an E-Commerce environment. Today, IKEA is also trying to use artificial intelligence to quickly respond to the questions most frequently asked by consumers when asking questions online.
After the transformation of E-Commerce, IKEA’s central distribution system became a factor in lowering logistics efficiency because the number of warehouse nodes was too small. Before 2012, there were only three logistics distribution centers in IKEA China. The suppliers were delivered to the three distribution centers of Fengxian, Taicang and Qingdao. After passing the test by the IKEA Product Testing Center, they were sent to the IKEA stores across the country. However, in the era of E-Commerce, orders were distributed across long-distance logistics, but at the expense of efficiency. Logistics expert Zhao Xiaomin told “Chinese Entrepreneur” that IKEA delivery time takes 3~10 days, and the process needs to be further simplified.
In terms of both the installation experience and the speed of distribution, IKEA has some examples in the home furnishing industry, such as the TATA wooden door with sales of more than 600 million in the “Double 11” in 2017. Its online orders are handled by offline stores for logistics and after-sales installation, but the premise is that through the franchise system, TATA has more than 2,000 stores, covering 100% of the prefecture-level cities and 80% of county-level cities. “If the customer places an order online and we don’t have a store in the local area, we will tell him, sorry, we don’t sell it.” A TATA insider told China Entrepreneur.
In contrast, IKEA China, which currently has only 25 stores, still has a long way to go. It is also making up for its weaknesses: in the stage of preparing for E-Commerce, IKEA has built four central distribution centers and three A small parcel distribution center, Wenzhou also set up a small order center with experience and storage functions. By 2020, the number of central distribution centers and small parcel distribution centers will increase to five. Yang Fan told the “Chinese Entrepreneur” that in order to improve the speed of logistics and distribution, in the future, according to the development of E-Commerce business, IKEA stores will gradually join the distribution network.
Laggards?
Despite finally striding into the era of E-Commerce, IKEA China has to face doubts. Is this step too late?
“This method of IKEA can be put five years ago. It is not necessarily possible to put it today.” Li Wei, an analyst who has been engaged in the research of the home industry for many years, judged “Chinese Entrepreneur” that IKEA “has fallen behind today’s era.” E-Commerce.”
Indeed, today’s E-Commerce environment in China and when IKEA first shouted into E-Commerce six years ago, it is already a sea of sangtian: experienced the transition from “not E-Commerce is outdated” to “E-Commerce is dead”, Ma Yun in 2016 The concept of “new retail” thrown out by the Yunqi Conference in the year is the theme of today’s business sector. The home store and the Red Star Macalline, which used to be the same as IKEA to exclude E-Commerce, have hit the wall in the transformation of the network. In 2018, the two giants gave up their own singles, respectively, standing in the team Ali and Tencent, in the new home. The retail sector has once again gathered.
Not only has the competition in the home industry changed dramatically, but the world’s retail giants who entered China in the same period as IKEA also lost their dominant position in the E-Commerce and new retail competition. At the end of October, Zhu Changlai’s old club, who had served 22 years ago, and former retail giant Metro also reported that he planned to sell and withdraw from China. Earlier, Carrefour threw an olive branch to Tencent, and Wal-Mart shook hands with Jingdong, Lotte Mart. Selling good things and good interests, and moving to Southeast Asia.
In the view of Li Wei, it is advisable to use the official website of the home to do E-Commerce, and only provide image display and logistics distribution. This method is somewhat original. “Now the E-Commerce has long been not simply selling goods online.” Li Wei believes that consumer shopping habits have also changed, and more gameplay is needed, such as social grouping and interaction, and the boundaries between online and offline are It becomes blurred, users are also divided, and they can shop at any time, anywhere, and in any scene.
For the IKEA E-Commerce layout, there is no lack of optimistic voice. Logistics expert Zhao Xiaomin said that “China Entrepreneur” analyzes that IKEA needs to solve the traffic problem. For the OEM and ODM models of IKEA, as long as the traffic goes up, the cost is not a problem, and the cost can be further reduced through large-scale procurement.
Some people also regard IKEA as a “new retail” textbook and imitate it, such as the Qumei Jingdong House on September 27th. In the Jingdong “Unbounded Retail Model Room” jointly developed by Jingdong and the home brand Qumei, “Consumer Stay Time” is the second largest assessment indicator after the actual transaction volume. This is essentially an imitation of IKEA. It is a place where you can sit and sleep in the standard IKEA, a cheap Swedish snack, and Qumei Jingdong’s home has introduced a bookstore, a coffee shop, and a LEGO experience area to preserve consumers. Inspire the scene consumption.
In the view of E-Commerce analyst Zhao Zhenying, the arrival of the Internet of Things era and the intelligent transformation of homes are the biggest challenges facing IKEA. Zhao Zhenying told China Entrepreneur that E-Commerce is a basic node of the Internet of Things and an important source of consumer data in the transaction segment. In the Internet of Things era, IKEA’s E-Commerce platform should not stop at a simple trading platform, but should It is the Internet of Things portal and data support platform. It is a key tool for building a customer management system to help companies develop lifelong customers.
Perhaps for IKEA, these are just the gains and losses of a city, a pool, and one place. The ambition of IKEA, as Ingvar Kamprad said, “As long as there are human habitats on the earth, strong. And effective IKEA should always play a role.”
However, in the IKEA “Bible” and “A Warrant of a Furniture Dealer”, the founder has another caveat: fear of error is the root of bureaucracy, the enemy of development and progress, and should be cautious in dealing with experience. .