Ikea to launch e-commerce business model in Shanghai

Swedish home furnishings retailer Ikea Group will launch its e-commerce business in Shanghai and start to sell its products online by the end of August.

This is the company's first online sales attempt in the Asia-Pacific region.

As a pilot programme, the delivery services will be limited to Shanghai for the moment. All of its ready-to-assemble furniture, appliances and home accessories, except for food and green plants, will be sold online. Ikea plans to expand its e-commerce services across the country if the trial run is successful.

The company said that a few years ago it started to develop an e-commerce business model in Europe, especially northern Europe and the United Kingdom. China will be the first country where it tries out e-commerce operations in the Asia-Pacific region, as part of its multichannel retailing strategy.

Lu Zhenwang, an internet expert and chief executive of Wanqing Consultancy in Shanghai, said: "The physical stores of Ikea are very big and require large areas. The stores in first- and second-tier cities are nearly saturated. "There aren't any Ikea physical stores in third- and fourth-tier cities though the demand is emerging, so it's essential for Ikea to launch e-commerce services and to serve those places easily in the future. It would be convenient to set up some pickup and order points in smaller cities."

In May, the furniture retailer established a pickup and order point in Wenzhou, Zhejiang province. The stores in Ningbo, a nearby city, will provide goods for that service.

"This business model, with small investments, is suitable for smaller cities, where they don't have physical stores. Ikea will launch more such pickup and order points in China," the company said. In its 2016 financial year, Ikea achieved sales revenue of 11.7 billion yuan ($1.76 billion) in China, jumping 19.4 per cent year-on-year. During the year, about 83 million customers visited Ikea stores, up 20 per cent over the previous year. Also, Ikea websites had more than 67 million individual visits, an increase of 25 per cent year-on-year.

Ikea has opened three new stores in China this year in Chengdu, Suzhou, Jiangsu province, and Foshan, Guangdong province. The retail giant said it will keep to its plan of opening three new stores in China every year.