[Interview] Ikea changes how you live, and defends its delivery fees

Industry

Published: 12 Dec. 2021, 17:48

[Interview] Ikea changes how you live, and defends its delivery fees

Fredrik Johansson, a country retail manager of Ikea Korea, poses at the company's Goyang branch in Gyeonggi on Dec. 7. [PARK SANG-MOON]

Ikea's arrival in 2014 helped change the Korean furniture market.

It brought with it aggressive pricing and a do-it-yourself model that connected with many people and made furniture shopping less feared and almost fun.

Through its iconic, dreamlike show rooms, the Sweden-inspired, Netherlands-based furniture phenomenon inspired people to add their own personality to their homes. Furniture shopping became more of an enjoyable and fulfilling excursion.

Almost a decade later, Ikea is no longer so unique.

Competitors, such as Hanssem, Hyundai Livart and Ohouse, a social-media-based company focused on home interiors, started offering inspiration related to homes through virtual and physical show rooms. Some of them one-up Ikea with faster and cheaper delivery and more affordable assembly fees.

Regardless of how the market is evolving, Ikea Korea isn't shaken.

"For Ikea Korea, No.1 is to inspire people — to understand what they do, what is possible for them to do with their home and their life," said Fredrik Johansson, country retail manager, Ikea Korea, during an interview with Korea JoongAng Daily at Ikea Goyang in Gyeonggi on Dec. 7. "No. 2 is to select the right range for them to fulfill their dreams and needs."

Johansson, who defines home as "your own little paradise," added that Ikea Korea will tirelessly work to inspire how people think about their homes.

Ikea Korea is the second largest home-furnishing company in Korea. It had 6.7 percent of the home furnishing market in 2020, after Hanssem, at 13.8 percent, according to Euromonitor International, a market research firm based in London. The home furnishing market grew 31.2 percent from 5.06 trillion won in 2014 to 6.64 trillion won in 2020.

Below are the edited excerpts from the interview.

Q. It's been seven years since Ikea entered Korea. How do you think Ikea changed Korea's home furnishing market?

A. I think Ikea has had and still has major impact on the home furnishing market. We were the first to use inspiration when it comes to home furnishing. A store would display 50 tables in a room for a customer to choose; a very functional approach. But we came with room settings, inspirations and personalization. I think that was a big shift in Korea.

Also, the fact that Ikea came into the market had a very positive effect on overall home furnishing prices. Other players in this market lowered their prices tremendously just to make sure they could stay competitive when Ikea entered.

Another change is pricing transparency. Typically, in Korea, everything is free. That is at least how it is presented — delivery, assembly. But in reality, everything has to cost. We want to be very transparent. If you pick up the product that you want, bring it home and assemble it, you must have financial benefit compared to somebody who will have it delivered to home and wants somebody else to assemble it for them.

What's your opinion on the delivery war? Ikea rivals started offering faster and more affordable delivery.

It's a good service to offer because some customers want it. But we've found that people normally don't want the furniture delivered on the same day or tomorrow. They want it later when they're home or can bring friends over for help.

As for price, it is a never ending journey. If we include delivery prices in every sale, a person with the thinnest wallet who is willing to do something by themselves will have to pay more because they would be subsidizing the cost of home delivery for others who want more convenience. We'll continue to find ways to become more affordable, but not just affordable for people that just want lots of services at the expense of people who have the thinnest wallets.

When it comes to product prices, first of all, it's important to understand how Ikea is built up. It starts with vision -- creating maximum positive things for the world. We're not a listed company. We don't have big expectations on the bottom line. When it comes to profit, everything goes back into company. Invest to lower product price, better production line, more stores, better efficiency online. A small part, we use it for the Ikea Foundation.

Korea is often viewed as a small but dynamic market where trends change quickly and consumer expectations are very high. Does this make Korea a tough market for a global company?

Maybe that makes Korea a tough market, but it also makes it fun. We have to make sure that we become better all the time and constantly find inefficiencies.

Korea is in the forefront of a lot of trends. So if it happens here now, it will happen in Europe at some point. Since we tested different solutions in advance, we can feed other markets with what we've found. It's extremely helpful for us as a global company that sets those trends and has high expectations because it helps us become prepared in different markets.

Is there a unique characteristic of the Korean market compared to that of other countries?

Korean people have very functional relation to their home, in contrast to western Europe, where people have a very emotional connection to their home. In Europe, you spend more time at home. For example, you normally bring your friends to home when you meet them. You bring them home and cook something. You very seldom take friends for dinner at a restaurant because dining out is simply too expensive. So you do everything at home.

In Korea, it's more of a functional relation. You sleep there and might eat there, but you entertain outside. I believe the two-year jeonse system that makes people move frequently is one of the reasons behind Koreans taking a practical approach to home.

But we've seen a clear movement during Covid-19. During the period, a home has become a place where you work, study, watch a movie and work out. Then people also started experimenting with cooking at home. We're still far away from where I think will be good to be from an emotional well-being point of view, but the movement from functional to emotional relation to home is clear.

More big companies are expanding investment in the home furnishing business. How does this affect Ikea?

It affects Ikea in a very positive way because having bigger companies trying to make the same change -- encouraging people to build an emotional relationship to home rather than having a functional relationship -- and getting more people to talk about home furnishing. Everybody will win from that.

Does Ikea Korea plan to open more stores next year?

We don't have a quantity. It will be a matter of penetration -- how many people we can interact with. For instance, we opened a new branch in DongBusan in February last year. Since we opened it during the Covid-19 period, we don't know yet whether sales at the store will jump or maintain the current level once the pandemic stabilizes. We don't know to what extent consumers living in different regions will be covered by the DongBusan branch. So we don't want to put something into action before we really know. But we plan to find the right-sized stores and channels to interact with customers throughout Korea.

What are Ikea Korea's plans for next year?

Next year, Ikea Korea will continue to concentrate on sustainability. For example, we are using rainwater for toilets in the DongBusan branch. We don't use fresh water to flush toilets. We started using electric trucks in August last year for delivery as part of the plan to achieve carbon neutrality in furniture delivery by 2025. We plan to continue such efforts next year.

BY JIN MIN-JI [jin.minji@joongang.co.kr]