Size matters as Ikea returns to Japan

Tommy Kullberg has seen the inside of a few Japanese homes lately and if he has learnt one thing it is that they tend to be, well, rather small.

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The soft-spoken Swede heading Ikea's return to Japan and his team have visited more than 100 local residences to take notes and try to avoid a repeat of the group's disastrous first foray into the world's number two retail market.

Ikea has stores in more than 30 countries but none more challenging than Japan, where even the largest furniture retailer in the world has had to adapt its winning formula with a new store outside Tokyo.

Privately-owned Ikea is expanding in Asia including its biggest store in the world which just opened in China.

It first came to Japan in 1974 with a local partner but failed to win over Japanese consumers and withdrew 12 years later.

"We are meeting the most demanding customers in the world, used to high quality and high service levels. Anyone operating in this market has to satisfy these demands," Kullberg said during a tour of the new store.

"Why shouldn't Ikea be in the second-largest retail market in the world? Of course we should be here," he added.

This time, he said, the company has done its homework and is confident Japanese consumers, used to unparalleled service and smaller stores, are ready for its large-scale, no-frills retail methods.

At the heart of its new strategy is an emphasis on "small space living", with two-seater sofas, space-saving storage boxes and sofa beds for studio apartments. Most of the goods are the same as in its other stores.

In Japan, a country of more than 127 million where people live cheek-by-jowl in urban areas, rooms tend to be much smaller and children frequently live at home before marriage, often sharing space with grandparents or in-laws.

The new store, in Ikea's trademark blue and yellow colours, is one of its biggest, spanning 40,000 square metres (430,000 square feet), with 10,000 product lines, 2,200 car parking spaces, a child-care area and one of Tokyo's largest restaurants.

Disneyland is their biggest competitor, says Kullberg. And he's only half joking.

Whether consumers used to small stores and home delivery will adapt to Ikea's mammoth stores and self-assembly furniture remains to be seen.

Japan's retail history is littered with failed past attempts by firms such as Ikea, French supermarket giant Carrefour and British drugstore Boots.

"Multinational companies entering Japan often don't spend enough time to understand the nature of the competition here, which is usually fairly fierce, and the so-called unique needs of Japanese consumers," said David Marra, a principal at management consultants AT Kearney in Tokyo.

"The key challenge for Ikea will be to translate their very globally successful concept, the type of design they offer and their retail format, into an acceptable Japanese way," he added.

The early signs are positive, judging by the reaction to 14 Ikea show rooms that have been attracting curious visitors on the flanks of a leafy Tokyo boulevard ahead of the store opening on April 24.

"I thought at first the furniture looks good and then I looked at the price and was surprised because it's so cheap," said 39-year-old housewife Eriko Omori. "I will go to Ikea to shop and my friends say they will too."

Kenichi Hayakawa, 22, and his fiancee Noriko Hagiwara, who are getting married in June, were also impressed, and said assembling the furniture themselves for their new home would be no problem.

"I think it's more interesting and fun to set up ourselves," said Hayakawa. Ikea founder Ingvar Kamprad may be one of the world's richest people, but even he has taken a gamble returning to Japan with what is quite possibly the group's most expensive store ever to build.

It even bought the ground underneath - no casual purchase in a country with some of the world's most costly land.

A second store is already being built near the capital and Ikea aims to open a dozen in total by 2011 if it can find the right sites.

The stakes are also high for existing rivals, including out-of-town home improvement stores and downtown shops such as Muji, the "no brand" homeware retailer sometimes described as Japan's Ikea.

But with Japanese furniture sales in decline, despite 1.2 million new homes being built every year, all retailers can profit if they can manage to expand the overall market, says Lars Petersson, Ikea's retail manager in Japan.

"We have seen all over, wherever we have established stores, that there is room for everyone," he said, "In all cases we saw that the total cake became bigger."

AFP