Will IKEA succeed in South Korea?

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Will IKEA succeed in South Korea?

It finally happened. On December 18th of last year (2014), IKEA opened its first store in South Korea in the city of Gwangmyeong after years of rumors and long awaited anticipation by local consumers. With a floor space of 59,000 m2 (640,000 sq ft), the store at opening was the largest-to-date for IKEA worldwide. It surpasses the size of any of IKEA store in Sweden, the United States and even mainland China.

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News-to-Date and Unexpected Surprises

150221 ikea-03During the first 2 months after opening its first store in South Korea, a few unexpected surprises took place for IKEA. The biggest surprise was perhaps the issue which has to do with a map that was (is) being sold at IKEA stores worldwide. The body of water (ocean) between Korea and Japan was previously called the “Sea of Corea (Korea),” “the East Sea” and/or the “Gulf of Korea” on ancient maps. Now, the maps which were (are) being sold at IKEA represented this body of water as the “Sea of Japan” – which was received as being inaccurate, culturally insensitive and also ultra-offensive to 99.9% (or let’s just say the greater majority) Korean shoppers during its first few weeks after store opening. To address how and why the “Sea of Korea” became the “Sea of Japan” is a very long story and not the purpose of this article, so we won’t get into it any further today.

Another big surprise was the sheer number of visitors who came to see what was displayed at this IKEA store. On its 35th day of opening its Gwangmyeong store, IKEA Korea welcomed its one-millionth — count 1,000,000 — visitor. Roughly 30,000 to 35,000 individuals had visited the store on weekends and about 20,000 to 25,000 visitors during weekdays. Such crowds caused heavy traffic jams, shortages in parking space and very long waiting lines.

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In addition, three other reports related to IKEA Korea made recent news. The first was a report of visitors hoarding all the pencils. Second was the news report about the city of Gwangmyeong, who had welcomed IKEA to their city with open arms, was now going to penalize IKEA for causing massive traffic jams to deal with their civic complaints. Lastly, there were reports which had suggested that IKEA had over-priced all of their products in South Korea compared with other countries. After an in-depth consumer investigation, however, it turned out that some of their products were more expensive (partially true) and others were less expensive compared with prices in other countries (partially false).

One more aspect of the Gwangmyeong store is the “messiness” of its blankets and linen on display beds. It will take additional resources (additional labor) in South Korea to frequently make-up all the beds in all the showrooms due to unique (unusual) consumer behavior.

Road to Success in South Korea

There are some very unique aspects of the South Korean market to consider for IKEA’s success in South Korea. Here is a list of are just a few of them:

  1. The nature of “cookie-cutter-made” apartments (condos) and studio apartments (a.k.a. Office-Tel): Floor plans for these residential types are highly standardized and virtually the same. How consumers fit (mix-and-match) IKEA’s furniture into these overly standardized floor plans in Korea will be something interesting to watch.
  2. Appealing to “newly-weds” and single professionals: People in South Korea seldom live together before getting married. Getting married means getting a new place to live; and then buying “new” furniture for the entire home. Moveover, an increasingly number of young professionals, who are not yet married but have disposable income, prefer to live alone (not at their parent’s house) in small studio apartments. These apartments need furniture and home accessories.
  3. Becoming the preferred choice for local mom-and-pops (neighborhood) interior designers and carpenters: There are thousands of local carpenters who fix-up homes and apartments in South Korea. All of them have existing local suppliers who are doing business with them. Getting on the list (minds) of these home-interior remodeling stores will be important.
  4. Becoming the preferred choice when replacing “built-in” system kitchens: A typically high-rise apartment (condo) complex in South Korea has anywhere in between 500 to 1,200 residential units. Becoming a first-supplier, by working with construction companies (builders), and electronic-appliances (washer-dryer, gas-range) companies, to a select segment of apartments (condo) complexes could become another consideration for accelerated market penetration. Moreover, buyers of older homes (apartments) often “upgrade” their kitchen to make it feel new. This market for replacing existing system kitchens is also a big segment in South Korea.
  5. Product durability to withstand (survive) frequently moving Koreans: South Korean who do not own homes move around at least 3-10 times before eventually becoming home owners. The question of whether “self-assembled IKEA products” can withstand being moved around so much is something of interest to Korean consumers.
  6. Sitting on the Floor Culture: Traditionally, and even today, people sitting on cleaned floors, especially when gathered together at home, is a prevailing custom in South Korea. Understanding and applying how IKEA products may work best to accommodate this culture and introducing products that will fit with such cultural behavior is also something to consider. For example, other large retailers sell “bamboo” carpets to help consumers accommodate for South Korea’s hot-muggy-summers. Whether IKEA will localize their product line by introducing these “bamboo-style” mats (carpets) will be a point of interest by Korean consumers.

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As with any business, and at the end of the day, IKEA’s success in South Korea will hinge upon how many repeat consumers it can generate in terms of “life-time” buyers and getting good-to-great “word-of-mouth” ratings with reference to customer satisfaction. Although, it’s way too early to tell how business will turn out for IKEA in South Korea, it is certain that their presence will bring about extra-ordinary change to local competitors and many benefits to, and more choices for, end-consumers.

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