Ikea aiming to spread its influence across China

It's been a big two weeks for Ikea's Chinese operations, with the opening of a massive new store in Shanghai - its second-largest outlet in the world - and the announcement that the Swedish retail giant plans to continue expanding throughout the country.

Ikea now has nine stores in China after the doors were opened June 23 on the 49,400 square meter branch in Shanghai's Beicai district - second in size only to the Ikea in Skärholmen near Stockholm, which measures some 55,200 square meters.

Shanghai is now the first Chinese city to have two of the sprawling DIY stores but the company has plans to have 15 outlets in place in the country by 2015, including one at a second site in the capital Beijing.

A spokesperson for the company told media here that the existing Ikea in Shanghai - in the Xuhui district - had been seeing more than five million customers through its doors annually.

"The congestion and huge lines in the store and the lack of parking space have made it difficult for our customers to experience better services. This is why Shanghai needs a second Ikea," said the spokesperson.

Ikea's plans for expansion come at the same time the massive US-based retailer Wal-Mart has announced plans to set up an e-commerce base in Shanghai to tap into the Chinese market. Wal-Mart currently has around 330 retail outlets in China but wants to explore the rapidly expanding online shopping market as well - one that is now estimated to be worth more than 500 billion yuan (53 billion euros) annually.

Ikea claims double-digit growth over the past 10 years for its operations in China but there have been some important lessons learned along the way.

The company was forced to slash prices of an estimated 500 products - by between 20 and 30 percent - to ensure they were attractive to China's "price sensitive" shoppers.

And the retail market in China still shudders with the memory of the Best Buy experiment. The US-based home appliance retailer was forced to close all nine of its stores in China earlier this year after consumers perceived its prices as too expensive, according to industry watchers.

Website: http://www.ikea.com/cn/en

MS