In Ikea's China Stores, Loitering Is EncouragedBloomberg News
Yang Shuqi paces the aisles of an Ikea store in Beijing, looking for a “small bed with toys.” She’s not planning to buy one—her grandson Beibei just needs to take a nap. Unfortunately on this Saturday afternoon, every bed in the 43,000-square-meter (463,000-square-foot) store is occupied, with some children and adults fast asleep under the covers. Managers at the Swedish furniture retailer don’t mind. They figure that the more customers choose to relax in its Western-style showrooms or grab a cheap snack at the in-store restaurants, the more likely they’ll be to make a purchase once their incomes catch up with their aspirations.
“The idea is that maybe if you’ve been visiting Ikea, eating meatballs, hot dogs, or ice cream for 10 years, then maybe you will consider Ikea when you get yourself a sofa,” says Ian Duffy, the company’s Asia-Pacific president.
Ikea plans to more than double the number of its stores on the mainland by 2015, to 18, on a bet that incomes in China will continue growing at a fast clip. (Per-capita gross domestic product has more than tripled in the past decade alone). The chain said last month it will add $300 million to the $1.2 billion already being spent by a developer it partly owns to incorporate stores into new malls. The world’s largest home furnishings retailer also has three outlets in Hong Kong among more than 300 worldwide.
Market researcher Euromonitor International expects China’s home-furnishings market to surge 17 percent this year, to $28 billion. “Government stimulus spending and favorable policies toward retailing and consumer lending have encouraged overall retail growth in China,” says Alex Liu, a Euromonitor analyst in Shanghai. Ikea, which has been in China since 1998, doesn’t break out sales for the country; Euromonitor figures the Swedish retailer has the biggest share of China’s home-furnishings market, at about 7 percent.
Ikea’s Scandinavian-design furniture and in-store cafeterias serving Western fare are big draws for up-and-coming Chinese. “I like the environment,” says Zhang Xihua, a 62-year-old retired schoolteacher from Wenzhou, who makes it a point to drop in at an Ikea store in the northeastern section of Beijing when she visits her son. “It makes you feel like you’re abroad.”
China’s real estate boom also is bringing customers to Ikea. Property sales in the first nine months of this year rose 15.9 percent from the year before, the nation’s statistics bureau said on Oct. 15.
Even after years of record-breaking economic growth, however, China’s per-capita gross national income ranked 120th by purchasing power last year, according to the World Bank. So, for now, there’s a lot more looking than buying for many Ikea visitors. At the Beijing store, Xu Nan, a 22-year-old college student, had one of her friends snap a photo of her lounging on a black Vreta sofa that sells for 7,999 yuan ($1,197)—the equivalent of one-third of China’s annual per-capita GDP. “I’m still living in a dorm, but I want my future home to look like this,” she says.
The bottom line: Ikea stores are popular with Chinese consumers, but many browse rather than buy. The chain, eager to build its brand, doesn’t mind.