A growing middle class with greater home ownership has provided an ideal market for Swedish furniture giant IKEA in Asia Pacific. The retailer has been steadily growing its market share in Southeast Asia, having conducted hundreds of home visits to meet customers and see how people live in each market.
The retailer has been steadily growing its market share in Southeast Asia...
IKEA uses that detailed knowledge of life at home to present its range in a locally relevant way, focusing on living with children, small space living and storage. Low price offers are key to IKEA’s success in the region, where high levels of brand awareness have been achieved, particularly in Malaysia and Singapore.
Expansion continues in China and Southeast Asia, where IKEA now has two distinct products: traditional blue-box IKEA stores that stand alone, and IKEA stores that are fully integrated into shopping centres as an anchor to a vibrant retail destination. IKEA also uses this model successfully in its Russian markets.
Finding the right location is key. In Europe and the US, where most customers use cars, IKEA stores are usually located in the suburbs. In China, where most customers use public transport, stores are largely located on city outskirts and connected by rail and metro networks.
Ensuring a safe, efficient and cost-effective construction process is inevitably challenging in less mature markets with a lack of experience of high quality western-standard construction. Faithful+Gould is providing IKEA with integrated services in China, Malaysia and India. Our team comprises project managers, engineers, cost estimators, contract and procurement managers, permitting specialists, construction managers, and health and safety specialists, to meet the needs of individual project requirements.
Our first IKEA project was in the Baoshan District of Shanghai, where we delivered Asia’s first multi-level steel structure, comprising four sales floors, marketing hall, showrooms, café, offices and a five-level car park. Following successful completion, we were appointed to lead the construction of IKEA Hangzhou, a green-field project located in the Yuhang District of Hangzhou City. We are also working on store projects in Foshan, Harbin and Zhengzhou.
Work is under way on the first IKEA store in Southern Malaysia. Opening at the end of 2017, the store is located at Jalan Desa Tebrau in Johor Bahru. A shopping centre will be added, scheduled for completion in 2019. Again, we are leading the project management and bringing global best practice.
Implementing global brand standards is challenging, and, with these ambitious plans, a tightly controlled procurement process on each project is vital. For example, China stipulates the use of local design institutes, which have evolved from previously state-owned design firms. While standards have improved considerably over recent years, there are still limitations, with systems such as BIM not yet widely implemented.
Work is under way on the first IKEA store in Southern Malaysia.
The design and construction teams selected must be capable of providing high standards of quality, efficiency and cost-effectiveness. Where locations are more remote, there may be a more limited supply of contractors with relevant international experience. This can be overcome with the engagement of the region’s largest and most cosmopolitan contractors, but the challenges of an unskilled local labour force remain.
Our global best practice is aligned to the IKEA code of conduct, and we ensure this is properly implemented. The code specifies the requirements placed on suppliers, including compliance with pay rates, working hours and minimum working age, as well as environmentally-sound sourcing and procurement practices free from conflict of interest. IKEA suppliers are also responsible for communicating the code to their sub-contractors.
Faithful+Gould has extensive global retail experience, including major new developments, refurbishments and individual retail units. In addition to IKEA, we have successfully implemented global brand standards for clients in many countries.