Text丨Nicole, Produced丨Retail Krypton Planet (ID: LS-KXQ).
"Price reduction" is the melody of retail owners in recent years, and IKEA, which regards low prices as the cornerstone of business, is even more important.
Before the Spring Festival in the Year of the Dragon, IKEA China announced that it will launch more low-cost products in fiscal year 2024, accumulating nearly 500 models in the whole fiscal year, involving multi-scene furniture and home furnishings such as bedrooms, living rooms, kitchens, and some IKEA food.
*: IKEA official website.
At the end of August last year, when IKEA China disclosed its plan for the 2024 fiscal year, it mentioned that it would make ** investment in more than 300 products ("** investment", not price reduction), and a few months later, the range of goods covered by the price reduction was expanded, adding nearly 200 products.
IKEA, an indispensable part of the famous brand, IKEA restaurants, also have a share in this price cut, and some popular ** have beaten down a lot. Curry, meatballs, vegetables, rice, shrimp steak and cod children's meal** reduced to 999 yuan, and 48 gourmet snacks** below 999 yuan.
*: IKEA official website.
In fact, this IKEA price storm is not only happening in the Chinese market, but also around the world.
In January this year, IKEA Germany announced further price reductions for some products, permanently stopping the sale of 2,000 products, and in the future, individual products** will return to pre-pandemic and war levels in Ukraine or lower.
From February 1, Belgium's IKEA, which accounts for about a quarter of its total products, has reduced prices for 2,600 products, and mainly for the most popular and moderate products - accurate and ruthless. According to IKEA Belgium, this means a "** investment" of 48 million euros.
IKEA's latest round of price cuts also includes Canada, the United States, India and other countries, mainly for 2022 and, each country is trying to push for price cuts to sell more products and stimulate low demand.
What is the price reduction for IKEA?
As a Nordic home furnishing giant aimed at mass consumers, in the eyes of some designers, IKEA's aesthetics are very good, and you can furnish a comfortable and beautiful home with a small amount of money, especially IKEA's tableware, cups and bedding, etc., with a high level of appearance and texture. In the Chinese market, IKEA is very popular with some recent college graduates and young families.
*:Internet. But IKEA has been tightening the string of "low price" for many years. The recent price cut that has swept the world, in the opinion of Retail Krypton Planet, there are two main reasons.
One is that due to the war and the pandemic, IKEA has significantly increased its global product range in 2022**. Now, the situation is gradually returning to normal, and IKEA needs to correct ** as soon as possible to stimulate sales in stores. In the global context of cautious consumption, continue to build a low price mentality to attract consumers to the store and let them spend their limited money on IKEA.
For example, in the United States, some netizens found that the IKEA Billy bookshelf cost $69 in 2016, dropped to $59 in 2019, and $89 in 2022**. Now, it's back to $69.
It is said that IKEA aims to return ** to "pre-inflation-adjusted" pre-pandemic levels by the end of next year. Because, in almost all markets, IKEA feels that "low-priced goods are still particularly popular".
The other is that the continuous construction of low-cost capabilities, which has been integrated into the DNA of the company, is the basic skill that IKEA cultivates day after day. In the current difficult environment, it is especially necessary to increase the weight.
IKEA's goal has always been to make it more "accessible" and "affordable" for the masses. It's a lot like the philosophy of retail giant Walmart, "spend less, live well".
In IKEA's view, the more difficult the time, the more hope to cooperate with the best business to find some innovative ways to improve product quality and reduce costs. For example, savings in management costs (using new technologies, including the use of drones in warehouse and inventory management) and optimization of the raw material chain. IKEA can reduce costs and improve efficiency, but also create industry barriers.
Official website: IKEA Beijing-Tianjin customer distribution center project solar photovoltaic panels.
In December last year, IKEA China's Beijing-Tianjin customer distribution center in Tianjin's Baodi district was officially opened as IKEA's omni-channel order distribution hub in northern China.
For example, adding 19,000 square meters of solar photovoltaic panels on the roof is estimated to produce about 441 per year70,000 kWh of electricity. It also introduces green solutions covering different dimensions such as energy use, resources**, building automation systems, etc., including rainwater collection ponds to recycle water resources, which can save an estimated 2,000 tons of water per year. In addition, the center's recycling system reprocesses cardboard and plastic waste and re-feeds it back into the chain.
Not only the price reduction, IKEA has also made a thorough analysis of the money that consumers have spent over the years. IKEA's judgment is that in 2024, consumers around the world will need something practical, for example, goods around the theme of storage. Because, family life has become the focus of attention. This makes the department with shelves, boxes and other storage items one of the most important departments at IKEA right now.
*: IKEA official website.
According to the 2023 Life at Home Report of the Ingka Group (IKEA Retail), 40% of respondents around the world believe that a clean and orderly home makes them feel more satisfied and relaxed, and IKEA strives to provide them with a wide range of household storage units and lockers.
Low Price Roots: 3+1+1 Pricing Formula
China is one of the top 10 markets for IKEA in the world, and the only market outside Sweden with a complete IKEA value chain, covering product design, testing, production, procurement, warehousing and distribution, retail, shopping malls, digital innovation and more.
The price reduction storm continues to blow, in fact, it is also an opportunity for China's local top merchants to cooperate with IKEA to adopt new technologies and systems to continuously reduce costs and increase efficiency.
But it must be clear that IKEA's latest price cut, or IKEA's own claim of "** investment", is actually not an occasional passive move when the general environment is bad, but IKEA's survival principle.
In relation to the founder of IKEA, Ingvar. In a book called "The Story of IKEA" by Kamprad, the author mentioned that IKEA has always aimed at the public and made small profits as a principle, and IKEA pursues not only **low**, nor only**lower than others, but much lower than others.
In a word, the goods of the shopping mall ** in the eyes of the public must be staggeringly cheap, so that people have to buy them. ”。
Since 1995, IKEA has been selling hot dogs priced at 10-15 kroner in the market for 5 kroner, and the success has led to the growth of the IKEA food and beverage division two years later, directly or indirectly.
This case also inspired the founder, Ingvar. Kamprad established a formula for IKEA to price goods: 3+1+1, i.e. 3 kroner to the producer, 1 kroner to the tax office, and 1 kroner to IKEA itself.
Later, IKEA adjusted the price of 10 crowns from a maximum of 700,000 cups per year to 1 crown, and eventually, the "new hot dog" cups sold 12.5 million cups a year.
These attempts have laid the foundation for IKEA's development and growth on "value-for-money" products, and also established IKEA's tradition of continuous price reductions for many years.
In fact, the wind of price reduction has always been in the IKEA hypermarket.