Business

FURNITURE GIANT REAWAKENS IN FUNABASHI

Sweden's IKEA back in Japan after 20-year hiatus

Furniture giant IKEA marked its return to Japan with the opening of a store Monday in Funabashi, Chiba Prefecture, but some domestic rivals question whether the Swedish firm has learned enough about Japanese consumers to please them.

With its 40,000-sq.-meter showroom and some 10,000 items on sale, IKEA’s directly owned and operated showroom hopes to dazzle shoppers with its stylish Scandinavian furniture offered at low prices.

“The ‘Black Ship’ has arrived,” said Hiroe Tonegawa, chief executive officer of Tokyo Interior Co., referring to the Western ships that came to Japan during the 17th century, when most of the country was closed off from the outside world.

“But only companies like ours, who know the lifestyles (of Japanese) inside out, can truly satisfy Japanese customers.”

With its trademark Swedish colors of yellow and blue, the new store looks similar to the 220 outlets IKEA operates in 33 other countries.

But few of its younger customers are probably aware that this is not the firm’s first foray into Japan. The company launched a franchising deal in 1974, only to beat a retreat in 1986.

After a 20-year hiatus, IKEA Japan K.K. President and CEO Tommy Kullberg said the company has learned from its past mistakes, conducting extensive market research aimed at meeting the needs of its customers. It has concluded that size is the key.

“We saw hundreds of houses to figure out how you take a bath, how you cook, how you sleep and how you store things,” Kullberg said. “We drew a conclusion that our contribution will help Japan when it comes to sizes.”

He attributed IKEA’s failure two decades ago to the fact that the company was not ready for the demanding Japanese market — and that Japanese customers were not ready for the do-it-yourself style that defines IKEA.

“If you see our investment” — its purchase of a 43,000-sq.-meter site for the Funabashi store — “and our plans to open four to six shops in both the Kanto and Kansai areas in the near future, you can see how committed we are” to the Japanese market, Kullberg said. “We opened (the store) because (Japan) is the second-biggest economy and retail market in the world.”

IKEA’s store is near Minami Funabashi Station on the JR Keiyo Line. Its second shop will open Sept. 15 in Yokohama, and a third is scheduled to open in Kobe by 2008, the retailer said.

The store has 73 displays, mostly 4.5- and 6-tatami rooms, and four model houses, each aimed at specific demographic groups. One, for example, is “a room for a typical Japanese teenage boy who likes baseball and computer games.”

Although IKEA has not changed the size of its products, it has selected 7,500 items out of its 10,000-product lineup suited to cramped Japanese homes, according to IKEA Japan’s retail manager, Lars Petersson.

A few Scandinavian touches are included. Near the exit is a bistro that sells 100 yen hot dogs and a Swedish food market with such goodies as Daim chocolate, fish roe paste and lingonberry jam.

The store also sells doctor-approved kids’ items and sports a 730-seat restaurant, 2,200-vehicle parking lot and a nursery.

Last year, 410 million customers visited IKEA shops worldwide, with the firm racking up total sales of 14.8 billion euro.

Many industry observers say IKEA owes its success to efficiency. Its biggest secret is the “flat packs” — disassembled furniture packed into flat boxes for easy transport and self-assembly by customers — the brainchild of IKEA founder Ingvar Kamprad.

“Of course, we can assemble and deliver for an extra charge, but having the customer do it himself allows him to enjoy the product from day one,” Petersson said. “Besides, many find it fun to assemble (the furniture).”

Kullberg said cost efficiency is also a priority of management. Kamprad, for example, flies economy class and uses public transportation during business trips.

The result is furniture sold at startlingly low prices by Japanese standards. Tables start at 1,500 yen; an entire living room suite complete with with TV stand, sofa, bookshelf, rocking chair and coffee table can be had for as little as 85,600 yen.

But Tonegawa of Tokyo Interior says IKEA’s cut-price furniture is best for only a few years’ use.

“IKEA, while having wonderful creativity, is light and for the low-end market — not ‘real’ furniture,” he said. “The Japanese, having few natural resources, have a culture of using high-quality products for a long time.”

Tonegawa added that all the furniture sold at his store is tailored to match Japanese people and housing. “I want to show clients what real furniture is like.”

The Funabashi area is a battleground for furniture retailers, with 10 large shops mostly located within two train stops from IKEA.

Last December, Tokyo Interior opened its biggest store right next to where IKEA initially planned to build in Shin Narashino. But IKEA was unable to purchase the land and now the two stores are one station apart.

Kullberg, for his part, said his team enjoys the competition because “the more people talk about furniture, the more we sell.”

One concept IKEA officials are working hard to teach their Japanese customers is “making an ideal home.”

“In our world, home is the most important place and (having) children is the most important thing. Go home in time to see your children. That is the concept we want to inspire (in) people here,” Kullberg said, adding that after living and working in Japan for 14 years before joining IKEA, he is himself gratefully re-experiencing this Swedish way of life.

Which raises the question of how customers are reacting to IKEA’s arrival.

A couple who had just visited Room Deco, another furniture outlet two train stops away, said that while they liked the products in the catalog, they wondered if the quality is up to Japanese standards.

“I’m very curious,” said Seiichiro Sakamoto, 39. “But (French supermarket chain operator) Carrefour, also in the neighborhood, had to (sell its Japanese unit and) pull out because it underestimated Japanese consumers. Our standards are high, you know.”

His wife, Chizu, also 39, added that she doubts individuals would buy a whole kitchen, and that IKEA would have to have deals with housing developers and architects before people would purchase entire kitchens.

Citing the many furniture shops in the neighborhood, she said, “I wouldn’t mind seeing something other than furniture after IKEA, like a family entertainment facility.”

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