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IKEA to Try Japanese Market Again

This time around the Swedish retailing giant will focus on offering merchandise for `small-space living.'

April 24, 2006|From the Associated Press

STOCKHOLM — IKEA is hoping to be big in Japan by thinking small.

When the Swedish furnishings giant opens up anew in Tokyo today -- 20 years after suffering a rare failure in the challenging market on its first try -- the company hopes to show it has mastered the key to winning over Japanese customers: small-space living.

"Small-space living will be a characteristic throughout the entire store," said Tommy Kullberg, the head of IKEA's Japan division. "We have visited hundreds of homes and really gone through in detail how the Japanese live, how they cook, how they sleep."

It is that kind of meticulous preparation that has helped the company grow from a one-man venture in a small Swedish village to a global phenomenon with an almost cult-like following.

Today there are more than 230 IKEA stores in 33 countries, and sales have more than tripled in the last decade, to $18.3 billion in 2005.

From Texas to London to Moscow and Beijing, massive crowds have lined up for store openings, drawn by the contemporary Scandinavian design and affordable prices.

IKEA, said Bryan Roberts, a research manager at London-based consultant Planet Retail, "has been one of the biggest success stories of globalization."

"I struggle to think of any other retailers that attract that sort of excitement, those near-riots," Roberts said.

In London, police were called in to calm a crowd of 6,000 at a store opening last year. In 2004, three people were killed in a stampede of hundreds of shoppers drawn by a discount offer at an IKEA branch in western Saudi Arabia.

The annual IKEA catalog -- more than 160 million copies printed in 25 languages -- draws interest even in countries where there are no company stores. In India, people frequently take the catalog to local carpenters, asking them to make replicas of the furniture on its pages.

"IKEA's products have pretty much a universal appeal," Roberts said. "They are extremely affordable. They are very contemporary. It all comes down to value for your money."

But Japan remains to be conquered. IKEA's first venture into the world's No. 2 economy, which lasted from 1974 to 1986, failed to lure the Japanese audience, which was unwilling to embrace the concept of self-service and do-it-yourself assembling.

"We just were not ready to handle the very demanding Japanese market, and the Japanese customer was not ready for IKEA, and to drive things home and put it together themselves," Kullberg said. "It was a failure, no doubt about it."

What the company has learned since then will be on display at its new trademark blue-and-yellow store, which will feature nearly 130,000 square feet of showrooms and the largest restaurant in Tokyo, Kullberg said. Shoppers will be able to walk through 70 so-called room sets where decorators have put thousands of products on display to show how they can fit into the cramped quarters characteristic of Japanese apartments and houses.

"Every consumer that comes in here will have a sense of recognition and feel like 'This is a room I have at home,' " said Kullberg, who has done business in Japan for 17 years and was recruited by IKEA to lead the launch.

Of the more than 10,000 products sold by IKEA around the world, about 7,500 will be offered in Japan. Large sofas, beds and tables -- popular in Europe and North America -- have been scrapped because they would not fit in the typical Japanese home, Kullberg said.

IKEA also is making it easier for customers to get home delivery and is offering additional service to help assemble the furniture.

The Tokyo store will be the company's second-largest outside Sweden -- the largest opened in Beijing on April 12. Plans already are in the works for a second store in Tokyo, and Kullberg said he hoped there would be eight to 12 IKEAs in Japan within five years.

"We have to crawl before we can walk," he said. "But the market potential is huge in Japan."

"You would think that Japan would be the absolutely perfect market for IKEA," said Elen Lewis, a British business journalist who wrote the book "Great IKEA! A Brand for All the People."

"If they can crack the whole service concept ... so that there is less work for Japanese shoppers, then I think they have a better chance to succeed this time," Lewis said.

The company was founded by Swedish entrepreneur Ingvar Kamprad in his home village in southern Sweden in 1943. Despite its astronomical growth since then, IKEA is still privately held, and its founder is now listed as the fourth-richest man in the world by Forbes magazine, with an estimated fortune of $28 billion.

But Kamprad, who turned 80 in March and is now more of a figurehead than a hands-on executive for the company, is as well known for his frugality as for his wealth. He always flies economy class and prefers the subway over a taxi. According to Forbes, his car is a 1993 Volvo station wagon, and in a documentary aired on Swedish television last year, Kamprad said that during visits to IKEA stores he makes a point of having lunch at the store's restaurant before noon -- when coffee comes free with the meal.

That aptitude for finding ways to cut costs has become a hallmark for the entire company and is one reason IKEA was listed by Business Week this month as the most innovative retail chain in the world.

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