1. Ikea in China
19 Sep 2011

2. Executive Summary
As one of the biggest home product companies in the
world, IKEA’s performance in China is nowhere near
perfect. The 1.3 billion population market only
contributes 1% of IKEA’s global revenue. So this
PowerPoint identifies IKEA’s problems in China.
Analyses in this presentation shows that it is awkward
brand positioning and lack of Chinese culture knowledge
that is too blame. However, this PowerPoint also gives
the suggestion for IKEA’s new brand positioning and
tagline which will help adapt to the unique market of
China.

3. The Company Overview
Ikea has been in the Chinese Market for more than 10 years. Its first store was opened in Beijing
in 1998. Currently, Ikea has stores in 8 main Chinese cities on their Central Business District
(CBD)– Beijing, Chengdu, Dalian, Guangzhou, Nanjing, Shanghai (2), Shenzhen, Shenyang. Ikea
is now planning to open 15 more stores across China by 2015.
Basically, Ikea implemented its global strategy including its product, promotion, pricing and service
strategy in China. However, these strategies did not fit the Chinese market because the low
purchasing power of the majority of Chinese consumers, as well as cultural paradigms. Therefore,
Ikea has been adjusting its pricing strategy and free home delivery service to fit consumer needs
and culture paradigms. An example of this is when Ikea lowered the price of more than 500
products in 2009 by 20 to 30%.
The Ikea’s initial target audience was defined for low class to middle class. However, considering
the “price sensitive” and “product quality” concerns by Chinese consumers, Ikea has moved its
target audience to the “white collar” class; those who are professional, single, families with
children, double income or couple with no children.
In terms of revenue (as previously
mentioned), Ikea China just
contributes to only 1% of its global
revenue.

4. The Company Overview
Taglines That Ikea Has Promoted in the Chinese Market.
• Small changes, a refreshing new life
• Ikea has a way of wonderful life
• Affordable solutions for better living.
• Low prices but not at any price.
• Home is the most important place in the world

5. Why Ikea is in trouble in the China market?
Ikea is “too expensive” for the majority of consumers,
but is “too cheap” for real spenders.
• Product: IKEA’s products have a relatively low quality, it
has been common sense in China. For those who are of
the “white collar” class, this is the main reason that they
don’t buy big quantities from Ikea.
• Price: Too high for the majority of consumers. On the
other hand, this is a much too cheap brand for those
who actually DO have the purchasing power (since the
price has been reduced continually).
• Promotion: Vague positioning and target audience.
IKEA tries to over too much ground and spreads itself
thin; they try to cater to cover the majority of consumers
(which is low-end marke, who cannot afford it) and also
the white collar (middle-end market, who do not want
cheap things) at the same time.

6. Why Ikea is in trouble in the China market?
• Distribution: Not enough stores. China is growing rapidly and IKEA did not
following China’s pace. In some second tier cities such as Hangzhou, Chongqing,
there are people dying for IKEA’s products but they have no IKEA store in their cities!
As a result, some people buy big quantities from IKEA and sell them online, acting as
re-distribution agents. And surprisingly, IKEA is banning these “unauthorised” agents.
• Copy: Increasingly more companies copy Ikea’s products design from its
online catalog, and sell those furniture with lower price in their stores.
IKEA just doesn’t understand the Chinese culture
• In Chinese culture, “Face” shows up in different ways, for real spenders who
have purchase power, they would not buy if the brand positioned itself as the
low price or affordable brand.
• In China, traditionally, it is considered “not cool” to do the laboring of installing
the furniture. Therefore, DIY assembling does not fit the China market. Again,
this is a matter of “Face” that Chinese want to preserve
• Most of Chinese, especially rich Chinese, they prefer that furniture are made
by real wood (directly from the tree), and not Ikea style wood (made of
compressed wood chips).

7. The Competitor analysis
Main competitors of IKEA in China
B&Q JSWB JYSK
From UK China Denmark
Tag line “Safe, Healthy, Environmental- “22 years -- trustworthy quality tested by “Spend less money on quality
friendly” time” products”
Target Market Middle end Middle to high end Middle end
Products Style No specific style Covers Italian, French, German, Nordic
American, Spanish, British, Norwegian,
Danish, Swedish and Japanese styles
Distribution 57 stores spread in 18 major 9 Stores in Shanghai, Guangzhou and 8 stores in Shanghai, 1850
cities in China Changchun, More than 900,000 square stores in 35 countries
meters total store area
strength Low price, numerous stores Massive shopping malls, one-stop service Nordic style designers’ home
for furniture and home improvement products
products, quality products
Weakness No control of the design and Too expensive Low popularity
production of the products, very
low brand added value

8. The Competitor Analysis
• B&Q has a great advantage on the price and distribution
over IKEA
• JSWB beats IKEA with its high quality products and the
one-station shopping experiences which includes free
home delivery.
• JYSK doesn’t have the fame of IKEA, but its distribution in
Shanghai is much stronger than IKEA.
• However, IKEA’s design and the fabulous all-you-can-see
shopping experience stand out in the market.

9. Who is the target market in China?
We defined Ikea’s target market as
•“XiaoZi” 小资 or
•people who want to be “XiaoZi”.
The definition of “XiaoZi” 小资
•“XiaoZi” is most directly translated as
“petty” (Chinese) as in “petty
bourgeoisie.” (Chinese) .
•The term, has now been co-opted by
popular culture to mean something
entirely different and not entirely negative.
•today’s “XiaoZi”are not defined about
how they make money, but how they
spend it.

10. Who is the target market in China?
“Xiao Zi” 小资 –
•XiaoZi are the growing Chinese upper class,
between the ages 23 – 38 years old, who are
well educated and have jobs in business
buildings as “whitecollar” employees.
• They live in big cities like Shanghai, Beijing,
Shenzhen, Guangzhou, etc.
•XiaoZi may cover a similar group composed
of “white collar”, but XiaoZi pays more
attention to a taste, a lifestyle, an imagination
rather than a real class.
•They are similar to “yuppies” in the sense of
youthful materialism.

11. The behavior pattern of “XiaoZi”
They enjoy
“Quality of life” becomes
fashion, brands,
essential to XiaoZi’s
hobbies, and free conversation. Hate saving
thinking that is money, which means they
inspired by spend all of salaries per
Western month.
commercial and
artistic culture.
The XiaoZi
members have to
reflect their own
identity by
consuming certain
brands of foods, To lead a XiaoZi lifestyle is
drink, clothes even a necessary step to show
furniture. They also one’s own social and
They tend to spend most on educational status and
consume certain
brands to such as their living rooms, which the distance themselves from
Starbucks and heart of the home where many the majority.
Hagen Daz. people "show off" and entertain.

12. Positioning
3C’s Model
Consumer Competitor Capability
Stylish Inspirational Refreshing

13. The new tagline
Ikea, For Those Who Value the
Quality Life.

14. Thanks
Qianru Chen (Martino): 3295091
Huang Shushu (Joanna): 3267508
YIN HANG (Steven): 3255999
Fu YuJing (Qiqi): 3264543