IKEA made fanfare last week with the news of the launch of their flagship store on Chinese platform Tmall. This is the first time in the furniture retail company’s 77-year long history that they have sold through a third-party seller and expectations were understandably sky-high.
The reaction from both Chinese social media and the press has however, been lukewarm. Numbers for an opening ceremony live-stream held on 11 March were disappointment. The 3 hour stream comprised of a Q&A session with CEO and President of IKEA China, Anna Maria Pawlak Kuliga, which was followed by a live-commerce session in which products and deals were introduced. Reports say that only only around 260,000 people watched this highly publicized broadcast, with just 6,000 transactions being made and a conversion rate to payment at 1.27%.
Outside of the live-stream broadcast, netizens were also disappointed by the Tmall store itself. Some of the main points have been summarized below:
Limited Products & Limited Stores
IKEA are only offering 3800 of their best selling items for the launch of their Tmall store. This represents less than half of a product range that spans more than 9500 items. Netizens felt that this wasn’t enough and with some of the items hardly selling, they have questioned the product selection made. Additionally, the launch is only available to consumers in Shanghai, Zhejiang, Jiangsu and Anhui.
No Free Shipping or Installation
Also causing discontent, was the lack of free shipping. Chinese consumers have become accustomed to free shipping after spending a certain amount of money. One netizen complained that for a sofa that cost 2799 RMB, they would have to pay 119 shipping fees. Some cheaper items have a 5.9 RMB price tag, but for delivery the consumer is expected to pay 9.9 RMB. There is also no service available to help with installation.
Lack of Digital Innovation
The launch version of the IKEA Tmall flagship store is noticeably bare-bones. The company promises 3D mockups of showrooms and AR/VR technology to help consumers get a better feel for products digitally, but this will not be coming until later this year.
No IKEA Magic
In this article in CNR, the reporter bemoans the lack of IKEA magic or the feeling of it being a special experience. IKEA are so good at creating a unique offline experience in their stores with the mix of unique products, store displays and the way you can really touch and understand the items. Online this is lost in translation, and the reporter thinks with IKEA’s offering at launch, there really is nothing differentiating the Swedish brand from other furniture retailers found on Chinese e-commerce platforms.
There are local players like Linsy Home(林氏木业家具) who not only offer the clean simply designed furniture that IKEA is famous for, but also go above and beyond to match the needs of local consumers. Linsy Home offer the same products to all their consumers nationwide and offer free delivery, free installation and after-service. This is what young consumers expect from flagship stores on ecommerce platforms.
“Times where you could just leverage your global brand name in China are long over”, explains Re-Hub CEO, Max Peiro. “Chinese consumers are extremely savvy and demanding, and local competition is fierce.”
- Overseas brands need to either go big or go home when they are launching their flagship stores on Chinese e-commerce platforms. Consumers have high expectations and expect a full product range and full services, especially from an overseas brand.
- Be special and innovate. Aside from IKEA, a number of other global retailers such as Lotte, Carrefour and Metro have failed to translate their offline experience well to the world’s of Chinese e-commerce and new retail. Local brands are making use of the latest technologies to create deeper connections with consumers.
“We see China as the most advanced retail market in the world,”Peiro adds. “Where global brands can test and develop innovative ideas that later can implement in other markets globally.”
- Understand local needs and listen to your consumers. China is still changing so quickly and young consumers have little attachment to your brand. Only those brands that understand consumers fast-changing desires and adapt to them, delivering relevant products and a superb experience, will survive in this hyper-competitive, fast-changing environment.