A standardised approachto the world? IKEA in China

Ulf JohanssonDepartment of Business Administration, Lund University, Lund, Sweden, and

Asa ThelanderDepartment of Communication Studies, Lund University, Helsingborg, Sweden

Abstract

Purpose – The purpose of this paper is to analyse the marketing strategy in China of the furnishingretailer IKEA in the context of standardisation and adaptation of marketing activities. IKEA’s strategyin China is compared to its corporate strategy throughout the rest of the world.

Design/methodology/approach – The four P classifications are used as a framework to comparethe central marketing strategies of IKEA with marketing strategies used in China. The paper builds onboth primary and secondary data. Interviews with senior managers at IKEA are conducted andstudies on business and retailing in China are used.

Findings – The marketing strategies used by IKEA in China are found to be different from thestandardised strategies it uses throughout the rest of the world. Several of the changed strategies arecentral to the business concept of IKEA.

Research limitations/implications – The present paper shows the challenges for a standardisedmarketing concept and its implications.

Originality/value – The paper provides, in the context of the standardisation and adaptation ofmarketing activities, a more nuanced and up-to-date picture of the strategies used by IKEA comparedto previous studies.

Keywords Retail management, Marketing strategy, Standardization, China

Paper type Research paper

1. IntroductionRetail internationalisation is not a new topic. Rather, it is one of the most discussedtopics in retailing in the last ten to 20 years. The themes on these topics have varied.Much of the literature focuses on the direction of internationalisation – where differentinternational retailers have aimed their internationalisation efforts and their modes ofinternationalisation, e.g. organisational forms used to enter new markets such asstrategic alliances, joint ventures, acquisition, greenfield development, etc. (Alexander,1990, 1997; Brown and Burt, 1992; Burt, 1991; Dawson, 1994; Gielens and Dekimpe,2001; Gripsrud and Benito, 2005; McGoldrick and Davies, 1995; Pellegrini, 1991, 1994;Salmon and Tordjman, 1989; Sternquist, 1998; Treadgold and Davis, 1988; Williams,1992; Wrigley and Lowe, 2002; Vida, 2000). Some parts of this literature are fairlydescriptive in their nature, trying to describe the patterns and modes ofinternationalisation following the more general literature on international business( Johanson and Widersheim-Paul, 1975; Johanson and Vahlne, 1977, 1990). Anothermajor theme has been the notion that retail internationalisation does not follow a linearsuccess model but rather is a process of entry and withdrawal, denoting failures ininternationalisation (Burt et al., 2002, 2005).

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International Journal of Quality andService Sciences

Vol. 1 No. 2, 2009pp. 199-219

q Emerald Group Publishing Limited1756-669X

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A theme that dominates the literature on international marketing is the question ofstandardisation and adaptation of marketing activities from a company point of view(Baek, 2004; Levitt, 1983; Lim et al., 2006; Theodosiou and Leonidou, 2003; Szymanskiand Bharadway, 1993) or from a consumer point of view (de Mooij, 2004). Thisdiscussion has not really penetrated the field of retailing. With a few exceptions thatare mainly general discussions on the subject (Martensson, 1981; Salmon andTordjman, 1989; Treadgold, 1991), there is not very much research in this area. This isa strange shortcoming because, to a large extent, the literature on retailing seems tofollow that of international marketing.

Despite the fact that research on failures in international retailing argues that theformer patterns of internationalisation are no longer true (Burt et al., 2003), it seems clearthat for European retailers, interest in Asian markets is not particularly developed – andthat some of these markets do not give the easy successes expected early on. Someargue that thesemarketsaredistant inseveral senses (DupuisandPrime,1996;Evans etal.,2000; Evans and Mavondo, 2002) compared to the origin of many of the retailers activethere. This is something that seems especially true for the Chinese market – the focus ofthis paper.

IKEA, the Swedish home furnishing retailer, has been present in China since 1998.The company had three stores in 2006 but the plan is to build ten stores by 2012.Compared to expansion elsewhere in the world, expansion in China has been fairlyslow, by IKEA standards – three stores in eight years – but the company views it assuccessful. This may be an indication of the challenge ahead. After a fairly slow start,IKEA has seen substantial growth in China; between 2004 and 2005 sales grew by50 per cent. Still, with a turnover in China of approximately $120 million, the businessdid not make a profit. However, IKEA management insists that they would make aprofit in the near future.

Asia (including Australia), only accounts for 3 per cent of IKEA’s turnover, whileEurope has a share of 81 per cent and North America 16 per cent. Still, Asia and indeed,China, are a big sourcing market for IKEA. Asia accounts for 30 per cent of IKEA’ssourcing with China being the biggest individual sourcing market for IKEA with 18per cent of total sourcing.

A characteristic that makes IKEA stand out among global retailers is the – alleged –standardised approach to every market it enters. It looks and operates the same in everymarket. Or does it? Existing analyses of IKEA’s marketing strategy are either fairly old(Salmon andTordjman, 1989) or examined from a very general perspective (Salzer, 1998;Martensson, 1981, 1987) with little emphasis onmarketing activities in specific countriesand also with a lack of understanding of what standardisation and adaptation mightmean in a retail perspective. More recent studies (Edvardsson and Enquist, 2002;Edvardsson et al., 2006) have a distinct service-management perspective rather than anoverall marketing-strategy perspective.

In many ways, China is a culturally-different market and in that sense, it is achallenge. As already mentioned, price is one challenge for retailers who enter theChinese market. For IKEA, with its emphasis on price, low prices in China are a bigchallenge. Past experience of entering different markets has not always been positive.During the 1970s and part of the 1980s, IKEA tried to enter Japan but at that point intime, the Japanese did not like the flat packaging, which required do-it-yourself (DIY)skills.

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Among academics there is an increasing argument that one key success factor ininternational retailing has been the adaptation of marketing strategies, rather thanstandardisation (Dawson and Mukoyama, 2006; Rundh, 2003; Samiee et al., 2004). Theadaptation of marketing strategies seems to be especially true for internationalisationin Asia and in China. So where does that leave IKEA and its business model? Is itsomething that only works in Europe and the USA? Will IKEA, like other retailers,have to adjust its strategies to meet the very demanding and different Asianmarkets?

The aim of this paper is to analyse IKEA’s marketing strategy for China, in thecontext of the standardisation and adaptation of marketing activities. IKEA’s strategyin China will be compared to its corporate strategy in the rest of the world.

2. Conceptual frameworkWhat is standardisation and adaptation really about? As Ryans et al. (2003) pointed outthere is no consensus among researchers. However, this quotation sums up whatstandardisation (and adaptation) could be:

[. . .] the offering of identical product lines at identical prices through identical distributionsystems, supported by identical promotional programs in several different countries (Buzzell,1968, p. 103).

This definition stresses, in accordance with much of the literature, the four Pclassifications: product, price, place and promotion. Standardisation and adaptationthus refer to how and if marketing activities are adapted (in reference to the four Ps), ornot, across countries in which a certain company operates. Other researchers havedealt with standardisation and adaptation based on the appropriateness of eachstrategy. One of the more well-known advocates of standardisation of strategies, Levitt(1983, p. 65) argues:

The modern global corporation contrasts powerfully with the aging multinationalcorporation. Instead of adapting to superficial and even entrenched differences witheringand between nations, it will seek sensibly to force suitably standardized products andpractices on the entire globe.

Levitt argues in a general sense and mentions no products and no markets asexceptions from his vision of the globalisation of markets. It would be the same visionfor sectors that mix product and service (like retailing) and also for very differentmarkets across the globe. Levitt sees factors, like technology and converging consumerdemands, as driving forces. Although he was influential and after much debate, it issuggested that the weakness of the Levitt article lies just in his general perspective.From a very general perspective, it can be argued that everything looks the same.

Opposing views in the standardisation and adaptation debate are those who arguefrom a national, cultural perspective (Hofstede, 2001; de Mooij, 2004). Without muchstatistical evidence, two other advocates suggest that the world is “spiky” (Florida,2005), rather than “flat” (Friedman, 2006): the business landscape is not homogenousbut instead heterogeneous making adaptations necessary, at least when the view isinternational and working in culturally-diverse markets. Levitt and his fellow“globalists” argue that the world is becoming more homogenous, paced by technologyand converging tastes. The author, de Mooij (2004) and others, argue that yes, theworld is changing and that consumers, all over world, are having more of the same

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opportunities like increasing incomes but it does not mean converging consumerbehaviour. He argues that consumer behaviour is not rational and the mirror effect isthat companies’ marketing strategies cannot be standardised all over the world.Examples from soft drinks, clothing and automobiles are used by de Mooij to showthat consumer behaviour is diverging rather than converging and that companiesadapt their marketing strategies to national tastes and preferences.

While the debate on the appropriateness of standardisation or adaptation ofmarketing activities has generated a lot of research in other areas, there is not muchresearch on the topic in international retail, despite the centrality of this theme ininternational marketing. We find some discussions of this related to specific areas inretailing, for example, image research (Burt and Carralero-Encinas, 2000; Burt andMavromatis, 2006; McGoldrick, 1998; McGoldrick and Ali, 1994; McGoldrick and Ho,1992) but very little research of a more general nature, relating to the overall marketingactivities of retailers. Image mainly concerns itself with the effects of retailer marketingstrategies (what type of image has been created in the consumer’s mind by contact withthe retail company). Seldom are the particular strategies used to create the consumerimage discussed in the literature. Some authors (Sternquist, 1997) discuss globalretailers’ standardised expansion strategies but on a very general level, mentioningmostly private labels and formats.

Martensson’s study, focused on IKEA from 1981, where IKEA is used as anexample of diffusion of innovation in the area of international retailing. Martenssongives a detailed picture of a rather centralised retailer. A few years later Salmon andTordjman (1989) published their classical article where the issue of standardisation forglobal retailers is discussed. Here, C&A, Benetton/Laura Ashley, IKEA/Conran andMarks & Spencer are analysed and IKEA is found to have centralised management butadjusted marketing (in dimensions like assortment, pricing and promotion). Bothstudies are rather old. Salmon and Tordjman’s study is 20 years old, building on anexpansion that included 74 outlets between 1974 and 1987. Recently IKEA has 208stores and has moved into markets that are outside Europe and the USA, thetraditional stronghold for IKEA. Hence, it follows a company that was essentially aEuropean company at the time of the study.

Treadgold (1991) discusses international retailers in the context of localresponsiveness and benefits from integration. Global retailers – such as IKEA – areargued to achieve high benefits from integration and display low-local responsiveness.The discussion of marketing activities is on this general level and very little knowledgeis focused on different marketing activities. Also, as is the case with Salmon andTordjman (1989) and Martensson’s (1981, 1987) studies, the material covers the infancyof international retailing and does focus on IKEA.

With the exception of Martensson’s (1981), now-quite-dated study, there is a generallack of empirically-based studies of retailer international marketing strategies. Much ofthe discussions in the existing literature are very general and can only be expected tohave captured strategies in the sense of policy, i.e. how strategies should beimplemented. The actual implementation and tactics on for example, the local level of acentrally-planned marketing strategy, can be expected to differ to a certain degree.Thus, we argue that one of the things that the international retail strategy literaturesuffers from is a lack of empirical research, which means that policy is seen as actualimplementation and tactics.

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2.1 Conceptualising marketing activities by retailersWhen analysing different marketing strategies, there is a need for a classification ofdifferent marketing activities. That is the next step in our conceptual framework.Marketing activities by companies in general, can be and have been, described in theliterature in many different ways. The most common one, the marketing mix(containing the four Ps of marketing; product, price, place and promotion) is notwithout competition. In the area of industrial marketing, relationships have been seenas the main marketing vehicle rather than manipulation of price, etc. (Ford et al., 2003).Service marketing takes a similar stance, focusing more on the role of personnel in themarketing process (Gronroos, 2000). Generally, marketing activities can be seen asways for the seller – in this case the retailer – to adjust their offer to the market. Thatis how marketing activities are seen and used below.

In the retail sector, the retail marketing mix is the most-used classification (Davies andWard, 2001; Fernie et al., 2003; Freathy, 2003; Kent and Omar, 2003; McGoldrick, 2002;Varley and Rafiq, 2004). However, as retailing is quite different frommanufacturing (whichis the original base of the marketing mix), it needs modifications to make it fit withconditions in the retail sector. Aside from the products – merchandise – theconceptualisation needs to contain areas that deal with one of the different aspects ofretailing, i.e. the store and what happens there. Location, store formats as well as sellingenvironmentwithin the store, are relevant areas, which are often used in the retail literaturereferenced above. As retail organisations are increasingly active in the “traditional”marketing category of advertising and promotion, the conceptual framework also needs toinclude this. Accordingly, the conceptual framework that we use here is generated from the“traditional”ways of thinking aboutmarketingandhow to adjust themarket offering, but ithas been adapted to fit into the subject area of retailing.

Merchandise is a broad marketing activity and is related to putting together anattractive assortment of products for the consumer to buy in the store. The dimensionincludes the question of national and retailer brands, pricing and pricing strategy, aswell size of assortment and local variations in the assortment (compared to standardassortment for a certain chain). Location and store formats refer mainly to whereretailers establish their outlets or stores. As we will not make a detailedlocation-analysis in this paper, location is seen mainly as a dimension, which variesin relation to where, say, a city-centre store is located. In this study, store format relatesto the general set up of a store, i.e. the overall lay-out of the store in terms of number oflevels, placing of different departments and how space is distributed. Advertising,which includes different types of advertising such as, print and outdoor, as well asdifferent types of promotional activities, are both relevant and tools used by retailers.In addition, the type of media used and the content of the messages are also relevantissues. The fourth dimension is the selling environment and service of the store.It involves several issues (and is often called the in-store environment) and includes theoverall design of the store, atmospherics and signage. Service and service levels arealso included here, in terms of the number of personnel; as are “social dimensions” suchas, other customers in the store environment.

3. MethodsThis paper is based on both primary and secondary data. Previous studies, where IKEA’sstrategy is analysed, were used as background information. As already mentioned,

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some data were old and dated and a range of different aspects of data were analysed.To update some of the information, various documents were analysed, like IKEA’spublically-available web site. We also collected and analysed different advertisementsused by IKEA. Second, internal documents were used, which interviewees shared withus though they were not available to the general public. In order to gain informationon current strategies, IKEA managers were interviewed. We selected top-level,senior managers, who define the strategies on country level and on store level, in orderto cover different perspectives of the strategies and to get an insight into IKEA’smarketing strategies and tactics. In total, ten interviews were conducted includingmanagers responsible for the Chinese market as well as lower-level store managersbased in China. Issues covered in the interviews paralleled and followed the classificationofmarketingactivitiesmentioned above. In order toget first-hand experience ofmarketingstrategies related to real stores, observations were made specifically about theShanghai store.

4. IKEA’s general marketing strategyIKEA is the world’s largest furniture retailer. It was founded in 1943 by IngvarKamprad who used his initials I and K together with E – the name of his parents’farm – and A, which stands for Agunnaryd, his hometown. He opened the first store inAlmhult, Sweden in 1958 and since then the expansion has been exceptional. Today,IKEA itself owns 216 stores in 24 countries. The IKEA group owns 258 IKEA stores in24 countries and during FY08, planned to open about 22 new stores (IKEA corporatewebpage, 12 January 2009). If stores run by franchisees outside the IKEA group arealso counted, there are a total of 292 IKEA stores in 36 countries/territories. Hence, it isan international retailer operating in many parts of the world. China is one of its latestexpansions and Japan is the latest (2006).

To describe IKEA’s marketing (IKEA corporate webpage, 12 January 2009) strategyit is necessary to start with its business concept as formulated in IKEA’s businessmission:

IKEA offers a wide range of well-designed, functional home furnishing products at prices solow that as many people as possible can afford them.

The key words in the business mission, address several marketing aspects and themarketing strategy can be seen to emanate from it. One central theme is the allegedstandardised approach of IKEA: IKEA’s guiding principle is to work in the same wayin every country within which it operates. The main reason is that it gives operationaladvantages and makes it possible – it is argued – to keep the prices low and attractivefor as many people as possible. Another reason is that they want to create the sameimage everywhere. Hence, standardisation is part of their business concept and belowwe have described and analysed what it means.

According to the business mission, the target group is “many people” which is allcustomers, no matter their age, sex, social class or income. This might be achieved intheir domestic market, like in Sweden but not in other countries.

The basis of the marketing strategy is the merchandise, i.e. the product range andthe prices of the products. These are supposed to be the same all over the world. Thetotal product range covers more than 10,000 items. Very small adaptations for allcountries and all stores are made. The product brand used in the store, IKEA, is the

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same everywhere in the world. The Swedish product names are also used all over theworld. The Swedish names can be seen in any catalogue and store.

Referring to the business mission, prices on products are supposed to be consideredlow in comparison to what consumers find in competing stores as the aim is to deliverhigh value at low price. It means that price is relative and compared to the market ineach country, which results in different prices on the same product in differentcountries. Sometimes prices vary considerably between two countries; it results inSwedes buying IKEA kitchens in Poland. The business mission does not address storelocale, the selling environment or service levels but it does have well-developed andstandardised strategies, which deal with these factors. IKEA stores are mainly locatedon the outskirts of major cities making access by car the preferred mode oftransportation for customers.

Store formats are standardised and come in three different sizes with differentassortment sizes: 7,500-10,000 articles; and assortment differs little between the samestore formats across countries. So far, the stores have two levels: the second floor withroom settings, displayed furniture and children’s department, the restaurant andcafeteria are also placed on the second floor; the first floor is called the market halland the product range covers home decoration, accessories, etc. The layout of the storeand the different departments are generally the same in every store. The customer isguided through the store by a path with arrows.

The selling environment in the stores is designed to encourage interaction with thecustomer. The customer can see the products in a room setting, touch them and eventry them. The store environment is supposed to look the same in relation to: storelayout and design, signage, display and colours, service level, etc. This aims to give thesame shopping experience regardless of where the store is located. However, this doesnot mean that adaptation is not made in individual stores. For example, in differentstores the room-settings are adjusted to fit in with the local housing and livingconditions, rather than using a centralised formula. This might mean for example, thatthere are smaller rooms in some countries and more fireplaces in British room settings.Service levels are supposed to be the same around the world with staffing about thesame also. IKEA’s concept of the customer’s role in relation to the low prices haveimportant implications for the level of service: to have such low prices the consumerpays the price – they have to pick things up in the store, carry them to their car, takethem home and assemble them (even though home delivery and an assembling service,at a cost, is now widely available).

IKEA’s advertising and promotion is dominated by the catalogue; a marketinginstrument that is unusual for an international retailer but at the core of the marketingstrategy of IKEA. It is the most important marketing tool as can be seen by the factthat 70 per cent of the annual marketing budget is spent on the catalogue. It isproduced in 38 different editions, in 17 languages for 28 countries. It is producedin-house with a standardised layout, with the same products and same overallinformation; adjustments for editions in different countries or regions are fairly minor.To some extent, the covers of the catalogues differ; the models that are used differ andextra information may be added, for instance in countries or regions where lowfamiliarity with the concept is expected, information about the shopping procedures isadded. Some of the advertising is produced in-house while some is produced locally.This conforms to a section of the overall marketing strategy, which says that although

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it is an international organisation – with central guidelines on required marketposition – it can adjust messages and offers to fit local tastes and local competition.IKEA believes its strength is to be able to adapt to local customs and culture. However,the central guidelines must be followed and in several countries, IKEA’s uniquenessand innovativeness related to the local context, is emphasised. In Britain, campaignshave been launched based on the guidelines and one of the best known is the“chuck-out the chintz” campaign, where British consumers were urged to break withtradition. Chintz was used as a symbol for the traditional-style home.Naresh Ramchadani, who is the creative partner for IKEA’s UK advertising said:

We showed IKEA tables to women – who make 90 per cent of the decisions about homedecor – and realised that there was a difference between consumer’s taste and IKEA’s taste.That’s how we reached the “chuck out the chinz” tagline (Aitken, 2004).

In German and Austrian campaigns, “IKEA celebrates Kurt” was used to urgecustomers to renew their homes (Zentes et al., 2007). Both campaigns received a lot ofmedia attention, as they were provocative. It should be noted that local or regionalstore-based promotions or advertisements are the responsibility of the local storemanager.

IKEA also uses image events in order to get attention. For instance, IKEA furniturewas displayed in bus stops in Copenhagen. The activity gained a lot of coverage in thepress. Those activities and product placements are planned and produced on a nationallevel by local managers as they believed attitudes to furniture varied. The storemanager may produce press releases concerning the store. However, a recent study onthe representation of IKEA in the Swedish and British press ( Johansson et al., 2008)indicates that news related to the store is rare except for new store openings. Mostnews is about products and the company, which means that they concern issuesorganised by the national office. More interesting is that the representation of IKEA inthe press varies considerably between Sweden and Britain. The strategic work with thepress seems to differ in different countries.

A growing part of IKEA promotion is the IKEA family, IKEA’s loyalty programme.It consists of a loyalty card, a magazine with several issues a year and a specialassortment of products in the store. In some cases, IKEA family card holders also getdiscounts on other products in the store. Unlike other loyalty programmes, thecustomer does not earn any points on their purchases. While it has been used forseveral years in Sweden, it is only in recent years that it has been introduced in othercountries. The broader launch of the card is partly a belief that a loyalty programmefor IKEA (which has worked very well in Sweden) could work well and be a relevantpart of marketing strategies in other countries.

From the description above, it is possible to discern that the control over thedifferent marketing aspects for IKEA varies. It can be illustrated in a triangle.

Figure 1 shows that marketing aspects in the lower part of the triangle – the basicssuch as, range and products, store and the catalogue, are controlled by IKEA inSweden. These are also the aspects that are standardised and are supposed to be thesame all over the world. Only small adjustments are made. At the top of the triangle arethe IKEA family concept and advertising, promotion, etc. which are controlled locallyor from at a country level. Those aspects are less standardised and more adjusted tolocal or regional contexts.

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Looking at IKEA’s marketing strategy, a conclusion must be dawn that it isstandardised – using the same marketing instruments in the same way around theworld – giving individual countries and stores a minimal opportunity to respond to,what is perceived as, national and local market needs. From IKEA’s point of view, thestrategy of standardisation is logical as it provides a product with a “low price” for“as many people as possible” in a way that an adapting strategy would not.

4.1 IKEA in ChinaRecently, there are three stores in China, in Beijing, Shanghai and Guanzhou. While thefirst two stores are joint ventures (to comply with regulations in place until 2004 andthe inclusion of China in the World Trade Organization, the new store in Guangzhou iswholly owned by IKEA, which is how IKEA will operate in China in the future.

Entering into the Chinese market was a big step for IKEA, maybe as big as theirfirst step abroad when they opened the store in Spreitenbac, Switzerland in 1973(Torekull, 1998). China is potentially a huge consumer market but it is quite a differentmarket to what they have faced before.

First, the language is different and IKEA uses a Chinese name alongside the nameof IKEA. It is pronounced Yi Jia, similar to the English pronunciation of IKEA. Themeaning of IKEA, in Chinese, is positive and very appropriate: IKEA translated inChinese means “desirable for home living/comfortable home”, which is regarded as avery good translation in China. According to IKEA, “IKEA” is a well-known brand. InShanghai, 96 per cent of people living in the catchment area of the store know of IKEA.Fortune Cookies (Dagens Industri, 2006) the first market and opinion poll in China,showed that among people with a monthly income of no-less than RMB 2,500, living inurban areas and aged 15-55, as many as 75 per cent knew of IKEA (Cui and Liu, 2001).

In a country with a huge population like China, IKEA does not target as manypeople as it does in other countries. The main target group is female, as they arebelieved to be the ones that take decisions about the home. About 65 per cent of allcustomers are women in China. Women in China, according to IKEA, stand for change

Figure 1.Responsibility for IKEA’s

different marketingaspects

Products and product range

The store

The catalogue

IKEA family

Advertising Local

Global

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and they welcome change. It suits IKEA as they see themselves as providing the toolsfor change in at least one aspect of life: home decoration and furniture. Men are alsotargeted but more indirectly, because women have home-furnishing interests andactually make the decisions. IKEA also targets young customers – attracting peopleaged 25-35. The core customer is around 30 years old. Many from IKEA’s target group,are what in China are known as “the little emperors” and in literature they are alsolabelled “the me-generation” or “the lifestyle generation” (Schutte and Ciarlante, 1999,p. 139). This is the generation born during the One Child Policy and today they arebetween 15 and 27 years old. One of the characteristics of this group of consumers isthat they are believed to be impulsive, easy to influence, very social and committed toleading foreign consumer brands (Gunnarsson, 1997). They are seen as the futuregeneration that will soon be furnishing their own homes. This segment of thepopulation includes some 30 million people.

IKEA customers in China are different in otherways. They arewell-educated and livein the big cities in China. As the salaries of the target group increase every year, so do thenumbers in the target group. The typical customer in China, buys less when they visitthe store than the average IKEA customer elsewhere. But in Shanghai for example, thecore customers visit IKEA more often than anywhere in the world: 33 per cent comeevery month. This means – among other things – that there is a need for many changesin the store. The Shanghai store rearranges its room settings at least seven times a year,for new products or just for different holidays and campaigns, etc.

IKEA’s offer in China is to supply affordable solutions to Chinese customers, but theoverall image is different (see below), forcing IKEA to offer other values to theirChinese customers. The primary market of the Shanghai store is the core customers’monthly household income, which is RMB 6,000. This is high by Chinese standardsbut compared to other markets, where IKEA is present, it is not so high. IKEA’s criteriafor comparing different countries is by comparing how much work is needed indifferent countries to buy a certain set of products. The Swiss work only two months tobuy the product set, while the Chinese work one year and six months to buy the sameset of products. The following sections will describe and analyse the four marketingelements: merchandise; location; store formats and advertising and promotion.

4.1.1 Merchandise. Everything in an IKEA store, in China as everywhere else in theworld, is sold under the private brand IKEA. In the Swedish IKEA stores there areexceptions as it holds famous Swedish food and drink brands, but in home furnishingit is only the IKEA brand.

All products, as everywhere else in the world, have Swedish names and theassortment in a Chinese IKEA store is very similar to one in for example, the USA. In1998, three products were added in China – chopsticks, a wok with a lid and a cleaver –but they are now in almost every store around the world. The Chinese IKEA stores havea special set of teacups for the Chinese New Year. Also, 500,000 plastic placemats areproduced to commemorate the year of the rooster (BusinessWeek, 2005). At the moment,in mainland China as well as in Hong Kong, the beds sold are shorter, 190 centimetercompared to standard-sized beds of 200 centimeter. This is currently being reviewed butso far constitutes another adjustment in the assortment of products to fit local/regionaldemand. Many Chinese people live in apartments with balconies, which is veryimportant to them. IKEA has added model sets and special balcony sections in thestores, which show how you can furnish your balcony (Lewis, 2005).

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However, there are some major challenges for IKEA in China that the citationfeaturing IKEA’s Asia boss sums up:

When Ian Duffy was first put in charge of IKEA’s China stores four years ago, he spent hoursat the checkout-line observing customers. He did not see many. Instead, he saw plenty ofpeople crowding the Beijing store for freebies – air conditioning, clean toilets and evendecorating ideas. Adding insult to injury: shops right outside were offering copies of IKEA’sdesigns at a fraction of the cost. So, to lure shoppers, the Englishman launched what could bethe cheapest IKEA non-sale items in the world: a scoop of vanilla ice cream in a cone for12 cents. Thus, began IKEA’s strategy to beguile the finicky Chinese consumer by slashingprices in China to the lowest in the world – the opposite approach of many Western retailers(The Wall Street Journal, 3 March 2006).

In most countries, the image of IKEA is that they have low prices, which is one of thecompetitive cornerstones of its business mission (see above). But it is not the case inChina where it is rather the opposite that is the perception: that IKEA is a fairlyexclusive, western retailer and the store is for the higher-middle class (Lewis, 2005). Forexample, “Billy the bookcase”, which elsewhere is inexpensive and high selling, wasperceived as a luxury (Jungbluth, 2006). While the customers’ different perception ofprice has been accepted, the main strategy has been to cut prices. In order to do so,IKEA in China has been allowed to “break” unbreakable codes and rules in the IKEAorganisation. They have been given the authority to ignore sourcing guidelines that arelegio for the rest of the company. The basic step in the pyramid.

China is a big sourcing country for IKEA, for example, providing products toPoland. In China it has meant that imported products were subject to import taxes(about 22 per cent) and an initial lead-time of 12 weeks, though it has now been reducedto five weeks. To be able to continue cutting prices in the Chinese market, IKEA Chinahas been allowed to exceed and expand its sourcing of products in China, while the restof IKEA still sources the same products from somewhere else in the world. The actualfigures differ a little on how many of the products in a Chinese IKEA store are sourcedin China. Some say that half of the products in a Chinese IKEA store are made in China,compared to 23 per cent in other countries’ IKEA stores (TheWall Street Journal, 2006).IKEA representatives claim that 30 per cent of the assortment is made in China and inaddition, the local trading office is now looking for Chinese suppliers for 500 morearticles.

According to IKEA, this has resulted in lower prices as they have dropped by at least30 per cent since 2003; on some products the price has dropped as much as 90 per cent.IKEA’s single-seat Ektorp armchair retails for US$112 in China, which is 67 per centlower than the same chair sold in the USA (The Wall Street Journal, 3 March 2006).

IKEA, like many other companies doing business in China, is subject to copying.One observer noticed that many Chinese shoppers in IKEA were drawing pictures ofthe furniture and scribbling down descriptions of the products but not necessarilybuying them (Lewis, 2005). Copying IKEA furniture and style is to some extent easy.The catalogue and the store even provide measurements of the furniture. AnIKEA-style home furnishing has, in some areas, become a concept of its own, outsidethe control of IKEA. If you search the baidu.com, a local Shanghai web site, for “IKEAstyle” you will get more than 39,000 hits. By providing a focus on giving help on homedecoration rather than on selling individual products, it is easier to achieve a positionthat is not taken over by competitors that copy individual products: the Karlanda sofa

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is easy to copy but not the home decorating skills provided by the company in thestore, on the web site or in the catalogue.

If price will not always be IKEA’s main attraction in China, what will be theattraction? IKEA tries to position itself as a company with a unique competence inrelation to interior design. Helping customers with interior design is the basic message,rather than selling individual products at low prices. Focus here has also been onselected design elements, like storage. Many Chinese people live in small apartmentsand IKEA can help with smart solutions for storage that make life easier (at least thatis IKEA’s argument). The argument is very much about function while this contrastswith the traditional furniture manufacturers in China where everything is abouttradition.

From experience, IKEA knows that markets run through a life-cycle: when storesopen in a new country, most customers buy, what IKEA calls, market-hall products, i.e.everything but furniture. In established countries, the proportion is said to be: 65 percent buy furniture and 35 per cent buy market-hall products. It varies across IKEAstores in China but China has matured relatively fast with proportions betweenfurniture and market-hall products are fast approaching those in more mature marketslike those of Sweden and Germany.

4.1.2 Location and store formats. IKEA stores in China are located closer to the citycentre than stores in other parts of the world, which are usually located well outsidecity centres. A location a long way from the city would not be ideal in China, asconsumers do not have access to cars like they do in Europe and the USA. In China, thestores have to be where public transportation can take people and where there is somekind of hub through which many people pass. A good example is the Shanghai store,which is very close to several bus lines and one of the city’s metro lines. However,IKEA has still built 700 parking places under the Shanghai store, so there is obviouslyan expectation that Chinese shopping patterns will change in the future, with morecustomers coming by private car.

Public transport to the store is a contributing factor to the service level: home deliveryservices are more common and usedmore frequently in China (which is also available inother countries). Another, very overt difference, between the stores in China and in othercountries, is the array of entrepreneurs that have set-up home-transport services forIKEA customers along with home assistance in assembling the IKEA furniture.

In the new Beijing store – the largest IKEA store outside Sweden, interestingadjustments have been made to the store format. The store has wider aisles to cater forthe high volume of shoppers – China has up to three times more visitors than any otherIKEA store elsewhere in the world (The Wall Street Journal, 2006). The big-box format,which IKEA uses, is unusual in China where traditionally, shopping is done locally andat specialist stores. Hence, shops are smaller and locally oriented.

4.1.3 Advertising and promotion. In China, one of the big differences with the rest ofthe world is in relation to communication with the consumer and reliance on thecatalogue. In China, it is impossible to distribute the catalogue in the same way as it isdistributed in other countries – at a similar cost or reaching the same audiencenumbers. In China, the catalogue is only distributed in the store and in some of theprimary market areas. The stores rely on smaller brochures that are sent out severaltimes during the year. Staff at the entrance of the stores also hand them out. Thesebrochures are produced in-house and by the same printer in Almhult, Sweden that

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produces the larger catalogue, in order that they have the same IKEA layout anddesign.

IKEA has run many different advertisements in China, on television, in newspapersand in print. Themes in the campaigns are the same as everywhere in the world butwith a Chinese “twist” (be different and break tradition). It is suggested that maybe theChinese advertising line is a little “softer” than in other countries, like in the UK; itspromotions have a more humble feel to them, they do not shock, they provide friendly,home furnishing solutions, which can educate the consumer, offering home-furnishingpartnership solutions for the future. The advertisement featured below is typical(Plate 1).

The message of the advertisement is “Small changes, a refreshing new life”suggests that life can be made better, easier and nicer with small improvements and atlittle cost. Small changes are the key words in IKEA’s in-store marketing. Anotheradvertisement, which IKEA ran, had the theme of “do not be like your parents”, a themethat seems to speak directly to IKEA’s target group of young women 25-35 years olds(Lewis, 2005).

It can be argued that the websites of the different stores in China are important: theInternet is a common source of information for the target group, the youngermiddle-class. Also, this source is used as a way to educate customers about the IKEAconcept and to prepare them for the shopping experience before coming to the IKEAstores (see below).

IKEA is known for its “out-of-the-box” thinking when it comes to creating interest inits brand and products. IKEA in China is no exception. IKEA is supposed to have startedor sponsored a television showwhere the viewers are offered lessons in homedecorating.Another example of public relations (PR) activity is when, a couple of years ago, IKEAfurnished the interior of 20 elevators in less affluent, residential districts in Beijing, usingIKEA products alone. They wanted to convey the idea of a nice environment in a dullplace, so reaching untapped markets, creating the idea: “change is easy”. PR activitiesare also important to IKEA; the company took Chinese journalists to Sweden and taughtthem about Sweden, IKEA and the roots of the company.

Plate 1.IKEA print advertisement

in China

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4.1.4 The selling environment and service levels. While the products available in theChinese stores are basically the same as in any IKEA store in the world, the stores donot look the same inside. What IKEA tries to do is to build the room settings not like inthe USA, not like in the UK or Sweden but in a way that feels relevant to Chinesecustomers, with sizes of rooms and kitchens that are realistic by Chinese standards. Soeven with the same products, the aim is to make the store in Shanghai look verydifferent from the one in Malmo by using the set-up of the rooms. Thus, there is still thesame product range but adapted in each store through the presentation of goods andhome solutions offered. In China the store layouts reflect the layout of many Chineseapartments – an example being the balconies, as mentioned earlier.

In China, the overall the shopping experience is different. Chinese consumers notonly use a shop to purchase needed products, but also they use it as a social venue,which is a slightly different experience from shopping in Europe or the USA. Initially,Chinese people did not go to IKEA to shop but instead they went to socialise in apleasant environment (which is unlike other furnishing shops in China, where you arenot allowed to feel and touch the merchandise). This is still true – people in theShanghai store can be seen apparently sleeping in the beds and on the sofas andreading a book with their feet on the tables – but IKEA tries to ignore this, hoping thatthe same people will later return as customers.

The Beijing store is expected to take 20,000 visitors a day and at weekends, crowdsare so big that staff need to use megaphones to keep control. The 20,000 visitors a dayadds up to some six million visitors each year. This is to be compared with two millionvisitors, which is the average number of visitors to a non-Chinese IKEA store per year.As the staffing level is the same as at other IKEA stores around the world, there are, ofcourse, consequences to this service level.

After identifying the large number of people that visit the stores in China, it is nowonder satisfaction levels were down. In 2007/2008, overall satisfaction in China wasargued to be equal to satisfaction levels in the rest of the world, despite a lower score inrelation to some aspects for example, inspiration, waiting times and helpfulness ofstaff. The big-box format that IKEA uses is unusual in China, where traditionally,shopping is done locally and at specialist stores. Hence, the IKEA shops are smallerand have a friendly, local atmosphere. However, the self-service concept is not socomfortable for Chinese shoppers, where customers have to visit a warehouse to pickup their purchases and then assemble them at home. China does not have a DIYculture. To try to explain and justify the DIY concept – which is at the heart of theIKEA concept – is thus hard work in China. IKEA provides home delivery – long andshort distances – as well as an assembly service, for a small fee (home delivery shorthaul for RMB 50 and assembly of one piece RMB 40). IKEA has also unintentionallycreated an industry around itself – of delivery drivers that help assemble the IKEAfurniture. These pick-up trucks with drivers are lined up outside the stores.

IKEA tries to acknowledge these issues and provides information in the stores, onthe web site and in the catalogue, to prepare the Chinese consumer for the IKEAexperience. They even have shopping hostesses walking around the store explaining tocustomers how the concept works; and IKEA representatives argue that it is slowlyprogressing.

Studies by Edvardsson and Enquist (2002) and Edvardsson et al. (2006) have shownhow important the service culture of IKEA is to drive service strategy and to achieve

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market and business success. Here, service culture is related to developing a culturearound the interactive parts of marketing (service encounters). Thus, implementationof the service culture of IKEA is important to fulfil the IKEA concept. And how doesthis work at IKEA in China?

As indicated above, consumers in China are demanding when it comes to service.They are used to a high-quality service, where there are people to help with all kinds oftasks. The self service and DIY concepts of IKEA are hard for Chinese people to accept.So, are there other service-level issues that are difficult to accept?

In China, IKEA tries to implement a staff strategy that makes everybodyco-workers rather than traditional employees. However, it might be contrary to what ismore common in China, where workplaces have a stricter and more formal hierarchicalwork structure with supervisors telling employees what to do. IKEA argues thatfocusing on creating co-workers creates more responsibility, which in turn shouldcreate a more service-oriented environment. There is little valid data available onwhether this actually happens (IKEA uses mystery shoppers but this more-generaldata cannot be appropriately used here).

IKEA has another challenge that affects service and that is the fact that manyproducts – despite increased sourcing in China – have huge lead times, in terms ofshipping from Europe and other sourcing markets, to China. This has historicallymade it necessary for Chinese stores to promote and sell what they have currently gotin the store rather than promote products that are advertised in the catalogue. Owing tomuch effort to improve this situation, like increasing domestic production and buildinga new warehouse in China, availability in China is almost the same as for the rest of theIKEA group.

4.2 Standardisation or adaptation?In Table I, we attempt to compare IKEA China to IKEA elsewhere in the world inrelation to the four different dimensions of retailer marketing strategies that we haveinvestigated. As the comparison is done on a general level – China versus the rest ofthe world – it lacks detail but is, even so, considered to give a good overall picture ofhow marketing strategies in China differ to the general IKEA marketing guidelines.

Table I shows that IKEA has made changes in its marketing activities in relation tothe Chinese market. Prices of merchandise have been cut, based on a new supply chainjust for China. Location is different and store format is also different, to some extent.Advertising and promotion is quite different with much less emphasis on thecatalogue. Selling environment and service are aspects of the strategy where lessadjustment has been made. Compared to Figure 1 (the triangle), adjustments are madeon each level, from the top to the bottom. Compared to their own ideal, IKEA’sstrategies in China are different from elsewhere in the world.

It is argued that from the consumers’ point of view, the IKEA experience must bedifferent from IKEA in, say, Sweden. Prior to a store visit, customers in China canonly experience IKEA via advertisements and not via the catalogue. The visit to thestore is also different; there are more customers, a lower level of service and a slightlydifferent environment. In relation to culture and other competitors, it is proposed thatIKEA’s consumer image must be quite different because it is based on other productsources and adapted strategies and, in turn, the customer responds to all theadaptations.

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5. Summary and conclusionsIKEA has often been seen as a model of standardisation among retailers. It is arguedthat the company implements a standardised concept of home furnishing retailingaround the world with the same type of stores, which are located in similar places; andthe same assortment of products with a focus on price and DIY. IKEA’s success aroundthe world is phenomenal, however, until 1998, most of that success came from marketsin Western Europe and the USA, i.e. from markets similar to the home market ofSweden where the concept was developed. Markets in Asia are new challenges,different in many respects from the markets where IKEA has enjoyed so much success.So, does implementing a standardised business concept on an alien market work?

It is clear that IKEA has had to adjust and work harder in China than in othermarkets with some of its basic principles. Keeping the price low is one of thecornerstones of the IKEA concept. IKEA prices, compared to alternatives for Chineseconsumers, are not low but high, offering their products to fewer rather than to morepeople. IKEA China has had to drop some of its basic principles – a centralised sourceand supply chain – to be able to develop its business and reduce prices in order tocompete. Adjustments in IKEA’s marketing strategies can also be seen in relation to

IKEA in China IKEA elsewhere in the world

Merchandise Brand name is IKEA Basically sameproducts (95 per cent)Increasingly local sourcing for allproducts in the assortmentCutting prices dramatically

Brand name is IKEA Basically sameproducts (95 per cent)Increasing local sourcing on fewmarkets (Russia), otherwisecentralised sourcing and supplyCutting prices in all countries

Location and storeformat

Location closer to city centre, closerto public transport, etc.Two floors, underground parking,restaurant, Sweden shop, wideraisles in store

Location in most cases well out ofcity centre, out of town location(adjusted for car use)Two floors, parking outside store,restaurant, Sweden shop

Advertising andpromotion

Catalogue is minor part, adjusted(smaller) brochures are the concept,advertising to fit the IKEA conceptto local tastes, culture and position;promotion increasingly run fromstores, IKEA family is rolled out2008 in China, web is a tool thatprovides opportunity to increaseknowledge of IKEA concept to newIKEA customers

Catalogue is the base, advertising tofit the IKEA concept to local tastes,culture and position, promotionincreasingly run from stores, IKEAfamily is rolled out across countries,web is a tool that increasingly isused on new markets as informationtool to increase knowledge of IKEAconcept to new IKEA customers

The selling environmentand service

The room settings are adjusted to fitwith local tastes, size of rooms, etc.of Chinese customersMore visitors than in other IKEAstores in the world – with the samestaff level DIY, etc. concept is alienin a country were labour is lessexpensive – with prices that are notperceived as generally low.

The room settings are adjusted to fitwith local tastes, size of rooms, etc.of customers in countries whereIKEA worksDIY, etc. concept of IKEA isincreasingly accepted – the DIY,etc. is the “price” you pay for lowprices

Table I.Comparing IKEA inChina to IKEA elsewherein the world

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location and communication (advertising and promotion) to respond to thecharacteristics of the Chinese market. The adjustments are indeed more substantialcompared to other markets. The selling environment and service levels have not beensubstantially changed compared to other places. Rather, changes have been made toother aspects of the marketing strategy, i.e. offering a home delivery and assemblyservice. But it is clear that the perception of the IKEA store and service is different.Some aspects of what IKEA offers in China are alien to many Chinese people due to thehigh prices, the DIY element and the low-service levels. However, the IKEA brand andproducts are unique and give Chinese consumers a product offering that is unlikeanything else on the market. It is clear that to IKEA in China, it has not been enough toonly be attractive to a small, fairly well off-target group. Adjustments have been madewith the aim of being able to attract more consumers to the stores and not just thosewith higher incomes; and this new consumer group is not the traditional IKEAcustomer.

From an IKEA perspective, China has been a practical trial for its business concept.To some extent the jury is still out as to whether or not it has been a success; but IKEAargues that the “worst” part of the China experience is over. IKEA has learnt manythings in China and many of these lessons will be useful in other markets around theworld. One lesson for IKEA – according to senior managers at IKEA, is the fact that inorder to succeed in the Chinese market, it has not been able to rigidly cling to itsconventionally-successful business concept and marketing strategies. While keepingsome areas unchanged – assortment, brand name, overall communication, storeconcept, etc. – IKEA has been able and forced to adjust some other elements of itsservice to be relevant to this new market. Without radically adjusting prices andchanging sourcing and communication, it might have been another story. From anIKEA point of view, another lesson learnt is that a business cannot achieve the sameresults with the same tools on all markets. Adjustments have to be made with specialmarkets. In light of all the adjustments being made in China, is IKEA still true to itsbusiness concept? IKEA argues that it is, except it has to change the ways ofimplementing its business concept. In terms of consumer image it is doubtful, becausethere is still a long way to go to attracting the many potential consumers in China andin getting them to understand the DIY concept – that doing work yourself can savemoney (especially when the price is still perceived as high).

From a general retail standardisation and adaptation perspective, the IKEA case isone of implementing a standardised concept on a new and very different market. IKEAseems to havemade fewer adaptations than some other retailers fromEurope (Carrefour,B&Q, etc.). But is the marketing strategy of IKEA standardised or adapted? The actualimplementation of the IKEA concept in China has meant changes in a standardisedapproach in almost all areas. Some of these changes are what international marketingliterature would predict, for example, concerning advertising and promotion (Usunierand Lee, 2005). In other research, this is the part of the marketingmix that any companythat is going international would adopt the most. For IKEA China, the major marketingtool – the catalogue – was dropped in order to adapt to national conditions. It confirmswhat earlier literature has shown, i.e. that there are limits to how far a business can go instandardisation. It may also show that a high level of standardisation is possible onmarkets similar to the domestic one but in markets with different conditions,even standardised concepts must be changed in order to be attractive.

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Compared with earlier studies of retail internationalisation and the issue ofstandardisation versus adaptation, this study involved more detailed and up-to-datedata concerning a true international retailer. This information provided a more detailedpicture of the standardised retailer, IKEA.

Another interesting aspect about IKEA in China concerns consumer image. Thisstudy confirms some of the results from other studies (Burt and Carralero-Encinas,2000; Burt and Mavromatis, 2006) that the consumer image is relative to context. As forimplementing Marks & Spencer – unchanged to the Spanish market – the image ofSpanish customers is not the same as those of UK customers. In order to create thesame image of IKEA in China as in the USA or Europe, standardised marketingactivities will not be enough. Accordingly, the focus for marketing activities in Chinawill focus on culture-specific aspects. This means that the IKEA concept is astandardised one but the strategies and the marketing activities to realise thestandardised concept may indeed have to be adjusted to local marketing conditions.Even with this in mind, the creation of a similar image around the world may be anunrealistic ambition. Many impressions, which stem from a variety of sources, shapethe consumer image and only a few of them can be controlled by the retail companyand even if they are controlled and standardised, they are interpreted by consumers inways that are difficult to control and foresee.

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Corresponding authorAsa Thelander can be contacted at: asa.thelander@iks.lu.se

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