We're now joined in the studio by our reporter Grace Brown.
Grace, you mentioned in your report that IKEA has seen great success here in China, what kind of challenges did it face initially and how did it overcome them?
Grace: Well Mang Mang, IKEA - or Yi Jia Jia Ju in Chinese - is known in other markets such as Europe and the United States for its low prices and uniquely designed furniture. But when it arrived in China in 1998, it was seen as way too expensive; as I mentioned, the firm had to move its manufacturing to China to stay competitive; including building a factory in Jiangsu this year. Since the year 2000, IKEA has cut its prices in China by 50 percent. IKEA has also had to make products for China that create the appearance of more space, since apartments here are smaller. As IKEA’s President of China Retail, Angela Zhu mentioned, they also had to accommodate furniture for balconies, rather than gardens. IKEA also had to change its marketing strategy in China. For example, in many of its other markets including Europe, the IKEA catalog is the main way it reaches customers; but in China the catalog presented a major copyright risk, as some local, low-cost furniture makers would copy its designs. So in China IKEA has focused a lot more heavily on using social media like Weibo, the country’s version of Twitter.
Mang Mang: And how have other foreign retailers adapted to China?
Grace: Well take the world’s biggest retailer, Wal-Mart, for example; it plans to open 110 new stores in China by 2016. And it is upgrading its products in China, because customers here are increasingly spending on higher quality, more aspirational goods. It’s also investing in higher-quality groceries and fresh food, since food safety is a major concern for families in China. Meanwhile Tesco, the world’s third-largest supermarket group, provides minibuses for customers in some cities, since a relatively few number of Chinese already own cars. It also sells more snacks adapted to local tastes - from seaweed to pork floss donuts, and has set up the store more like a wet market, including cutting up pig carcasses in front of customers so they know it’s fresh. But according to the Bain China Partner I spoke to earlier, Jason Ding, there is a limit on how far brands should adapt - they can’t go beyond their ’core’ offering and into a totally new area that is inconsistent with them. So for example, IKEA adding chopsticks and woks to its range - which every family in China uses - when it already sells knives and forks hasn’t changed its brand image, and managed to accommodate local needs.
Source: CCTV
