The Journal The Authority on Global Business in Japan

INTERVIEW | BUSINESS

April 2014
Office Solutions: The IKEA Way
World’s largest furniture retailer offers unique new service
Custom Media
Photos by Antony Tran

Interview-IKEA

The sophisticated lines and clean simplicity that Swedish company IKEA has been bringing to homes around the world since its founding in 1943, are now increasingly to be seen in office environments. This, in large part, is thanks to a pilot program conducted in Japan.

Known as IKEA BUSINESS, the program provides an interior planning service, an email order service, and a membership scheme that gives access to special offers, campaigns, seminars, events, e-newsletters, and free tea and coffee when members visit a store.

Alan Mackenzie was involved in rolling out IKEA BUSINESS at the company’s Kobe store. The service proved so popular that it was swiftly adopted across IKEA’s six stores in Japan, and will be an integral part of the offering at the 14 outlets the company plans to have in the country by 2020.

“IKEA has developed over the years, and we see an increasing number of businesses—and not just offices—coming to purchase at IKEA,” said 46-year-old Mackenzie, who is originally from Fairfield, Connecticut.

“These businesses often need a little extra support, such as providing quotations, assisting with large-volume orders, special billing, and interior planning,” he said. “Companies also need to be able to directly contact the sales team in the stores for these requests, to make adjustments, place orders and so on.

“Having a dedicated business team in the store to help these customers is essential,” he added.

IKEA BUSINESS is just one new innovation at the company’s stores in Japan—a market, remarkably, from which it withdrew in 1986.

The world’s largest furniture retailer, the company has won acclaim for its modern designs—for lighting, furniture, and household equipment—as well as a reputation for environmentally friendly simplicity.

In business circles, its attention to cost control, operational details, and constant product development—meaning that globally it was able to reduce prices despite unstable currency movements—have attracted admiring glances.

As of January this year, IKEA owned and operated 303 stores in 26 countries, while goods with a total value of $38 billion were sold globally in fiscal 2013—a 3.1 percent year-on-year increase.

IKEA carries some 9,500 products, and a July 2013 report suggests that the company is the largest consumer of wood in the world, using 1 percent of the Earth’s wood supply.

Mackenzie pointed out that IKEA takes sustainability very seriously, with 32 percent of the wood used in its products certified by the Forest Stewardship Council, a global not-for-profit organization that certifies wood is legally and sustainably sourced.

“We have pledged to increase this amount to 50 percent within three years, and by 2020 we aim to be forest positive. Further, we plan to be energy independent by 2020.”

However, it was not all smooth sailing for the company in the Japanese market.

IKEA signed a local partnership agreement in 1974, but terminated the relationship 12 years later on the grounds that it was not the best approach to the market here. Some 20 years later—after both the company and the local market had evolved—IKEA was back. This time it was not in a partnership; instead, the parent company invested directly and the operation comprises stand-alone stores.

From their experiences, those at IKEA have learned that some markets are best handled directly, said Mackenzie, who came to Japan after graduating in international business and economics from Muhlenberg College, in Allentown, PA, and initially taught at an English conversation school here. He joined IKEA Kobe seven years ago and is now country manager for IKEA BUSINESS.

“The stand-alone store, carrying the full range, with trained workers and displaying in the IKEA way, is the best method of reaching customers,” he said.

The IKEA range is generally standard around the world, Mackenzie explained, although a number of items have been developed specifically for the Japanese market. These include the store’s futons, and the curry rice on the menu at IKEA’s in-store restaurants. With a total of about 800 seats, the company’s restaurants in Japan are among IKEA’s biggest in the world.

Products for living and dining rooms are particularly popular among Japanese customers, although Mackenzie admits that not everything that IKEA does has hit the spot here; red-and-white striped outdoor wind protectors, designed to be used around railings or fences, looked too similar to the banners on display at traditional Japanese festivals.

One major test of the company’s operations here is that Japanese consumers traditionally place a lower priority on home-furnishing purchases when deciding their expenditures compared with food, going out, or other activities. However, there is now an increasing interest in home furnishing, and IKEA sees big potential here.

Constant innovation is a cornerstone of IKEA’s global success, with four major launches every year and more than 100 designers around the world creating new products.

Innovation in the way in which it operates is equally important, with the company working with UR (the Urban Renaissance Agency) in the Kanto area.

“This cooperation was developed over the past year, with careful consideration given to how to work together, stock planning, and overall support,” said Mackenzie.

“IKEA can offer UR home-furnishing solutions to better enhance these spaces; not only the look and style, but also the overall space capacity, functionality at an affordable price.

“UR has over 400,000 apartments around Japan, which need to be renovated as they become vacant and before the next tenant moves in,” he said.

“In the Kanto area, the agency will use IKEA kitchens in many of their renovations, helping to support a well-designed, storage-efficient, and stylish layout at an affordable price and with a 25-year guarantee.

“We have also established a system by which UR will offer new tenants in Kanto the chance to select between a closet storage system or a TV bench that will be delivered and installed upon signing the contract.

“These items will be given to the tenant, and they are free to take them with them when they move out.”

IKEA BUSINESS is working with other real estate companies and developers to provide furnishings for model houses as well as completed homes, with developers delighted that they can now fit out a new home for as little as one-fifth of what it typically cost them previously—but the final product is still eye-catching and stylish.

“We see great potential with real estate companies and developers from their responses and repeat business,” said Mackenzie. “They have commented on how they get far more visitors to their model homes when they use IKEA furnishings.”