Wednesday, May 26, 2010

Ikea reenters the Japanese market

IKEA first came to Japan in the mid 1970s as part of an early wave of expansion in Asia. Following a long struggle, IKEA pulled out of Japan in 1986. Then, after developing into the global phenomenon that saw virtual riots among eager customers at the opening of new stores around the world in the ’90s and early 2000s, IKEA returned to reopen a giant store on the outskirts of Tokyo in 2006.

I wonder why Ikea did not succeed in the Japanese market. And to be frank, it does not suprise me at all. For the first part, the scale of a Japanese house and a western house is dramatically different. As a result, the dimension of the furnitures would be disparate too. It would be really awkward to stuck a "huge" Enropean styple furniture into a "tiny" Japanese house. For the second, Ikea appeal to the customers with its low cost and relatively high quality. But the Japanese would rather spend more to enjoy a higher standards quality at a relatively higher price, thanks to their nice economic status. And for the third, due to the small space, it is very normal for a Japanese family have their storage built-in (just as showned in the Doraemon's house). Then the need for certain kind of furniture such as cupboard or bookshelf may not be sufficient.

Since IKEA are not successful from the first time they entered in Asia, IKEA has planned for five years in order to return to Japan carefully as “Japan is the second-biggest economy and retail market in the world”, Tommy Kullberg, Last President and CEO of IKEA Japan K.K, stated(Wijers-Hasegawa, 2006) as Dahlvig estimated that though Japanese market is tough for entering, Japan is much more open and can lead IKEA to catch a pivotal role as a stronger company in Japanese market. (Carpell, 2006)

Moreover, Lars Petersson, replaced Kullberg and responsible for IKEA Japan K.K. since September 2005, also believes that the reentering for the second time is possible to achieve even if the Japanese market is more difficult for companies to establish stores than other markets in North America or Europe. He also claimed that their failure in Japanese market has been overstated since there are also some difficulties in some other markets, for instance, Russia market and Poland market. (Lane, 2007) Furthermore, IKEA is not the only the company that struggled through Japanese market at the first time but some other foreign retailers namely Carrefour and Sephora. Carrefour is the French supermarket while Sephora is a French cosmetic retailer. However, both of them have all come and gone. (Carpell, 2006)

IKEA finally reentered the Japanese market again in 2001 due to the deregulation of Japanese Large Scale Retail Store Law which is beneficial for large retailer to enter
(Jetro Japan External Trade Organization, n.d.). Kullberg confirmed that this is the right time for IKEA to step down in Japan for one more time (Sweden-Japan Foundation, n.d.) and he also added that “with the basic foundations in place I find the timing right to step down” (ibid.). Then, in 2002, IKEA Japan K.K. was established with the assistance of JETRO (Jetro Japan External Trade Organization, n.d.).

The new ideal concept of IKEA in Japanese market this time is "making an ideal home” and Kullberg also explained that "In our world, home is the most important place and (having) children are the most important thing. Go home in time to see your children. That is the concept we want to inspire (in) people here". (Wijers-Hasegawa, 2006) The center of its new strategy is “small space living” since children in Japan, a country of more than 127 million, usually live together with parents at home before marriage and also share pace with grandparents or in-laws. (The Local Sweden’s news n English, 2006)

IKEA believes that Japanese and Swedish designs are similar as both of them focus on clean, simple design made of wood and natural materials as well as living comfortably in small spaces (Jetro Japan External Trade Organization, n.d.). “Japanese consumers are more interested in designing the look of their homes by themselves rather than having it done by designer” said Yuki Kusama, IKEA spokeswoman (Carpell, 2006).

In addition, IKEA did marketing survey by visiting more than one hundred homes in order to figure out how Japanese take a bath, how they cook, how they sleep and how they store things (Wijers-Hasegawa, 2006) and what they think of packaging (Jonsson, 2008) so as to adapt their furniture to Japanese taste since they live in small and crowed home. Even though size is considered a matter, IKEA has not changed the size of their products but has selected 7,500 items out of its 10,000 products that suited to Japanese lifestyle instead (Wijers-Hasegawa, 2006) such as offering two-seater sofas, space-saving storage boxes and sofa beds for studio apartments (The Local Sweden’s news in English, 2006).

As we know that the prominent style of IKEA is the "flat packs" which disassembled furniture packed into flat boxes for easy transport and self-assembly by customers since they think that assembling on their own can bring enjoyment to customers. However, IKEA provides home delivery and assembly for an extra charge while offer low price products with Japanese standards. For example, tables start at 1,500 yen, an entire living room consisting of television, stand, sofa, bookshelf, rocking chair and coffee table total costs only 85,000 yen which is quite a low price, (Carpell, 2006) However, Tonegawa of Tokyo Interior argued that cut-price furniture can be a suit strategy for only a couple years and he also added that "IKEA, while having wonderful creativity, is light and for the low-end market but not 'real' furniture while Japanese, having few natural resources and a culture of using high-quality products for a long time". (Wijers-Hasegawa, 2006)

Besides, IKEA choose to create supply centers and warehouses in Asia instead of shipping from Europe which one-third of the 10,000 items in IKEA are made in Asia. Due to saving transportation cost and avoiding delayed stock, they ship the rest to distribution centers in Kuala Lumpur and Shanghai before sending them to Japan. (Carpell, 2006)

Nowadays, IKEA is directly owned the three new mega-stores in Japan, Funabachi, Kohoku and Port Island. The first shop was opened in Funabashi (Chiba) on April 24, 2006 with the Swedish traditional ceremony. This grand opening outside Tokyo gained a lot of attention approximately 35,000 customers who formed the long line outside. (News Gate NY, n.d.)

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