China Consumer

Money from meatballs

Furnishing giant turns to food strategy to boost store sales


Swedish surprise: IKEA’s pasta

When Swedish furniture giant IKEA started selling food and drink it was seen more in terms of  a customer service strategy than a new product line. Founder Ingvar Kamprad thought that if consumers were hungry as they shopped, they would be distracted and spend less. As the food offering was not initially seen as a profit centre, the menu was cheap and simple. In China, it included soft-serve ice cream for Rmb1 ($0.14) and hotdogs for Rmb6.

But what started as a way to keep shoppers in stores now contributes as much as 5% of IKEA’s revenues. In China, food has become a major part of IKEA’s marketing strategy in bringing consumers to its physical outlets. Last week the retailer even launched an e-commerce livestreaming channel called the “IKEA Flavour House” on Douyin, the short video platform owned by Bytedance.

 IKEA has dabbled in livestreaming previously to sell furniture. This time round, however, the live channel is focusing solely on food products. There are videos on food presentation and cooking demonstrations (think of all the ways to mix a few Swedish meatballs into Chinese cuisine, perhaps). To attract viewers, the livestream is also offering big discounts: a plate of spaghetti bolognese costs Rmb23.5 at stores, but viewers can get a two-for-one deal for Rmb26.99. Also on offer: ‘dine-in’ vouchers with face value of Rmb100 for almost half the price.

The move is part of the furniture giant’s overhaul of its sales strategy in the face of online competition, using its burgeoning menu of culinary items to lure more customers to its physical stores.

“According to IKEA’s own statistics, 30% of its shoppers come to IKEA to eat. Food can be a powerful tool to drive IKEA’s offline sales,” E-Commerce News, a news portal, surmised.

IKEA has also adapted its Swedish  menu to local tastebuds. For instance, in Chengdu it offers spicy skewers (popular street food in the Sichuan capital). At its Shenzhen outlets, it serves Cantonese-style breakfasts.

The tweak in strategy comes at a time when Ikea has been closing down non-performing stores in China and pivoting from outlets on the outskirts of cities to more central locations. The company, which has been slower than peers to embrace e-commerce, has also added a virtual storefront on Alibaba’s Tmall.

“With the rapid development of e-commerce, offline retail business is gradually shifting to online. IKEA must adapt to that change in order to meet the needs of consumers. Sticking to the old business model is not going to drive foot traffic to its offline stores. On the contrary, using online channels to drive foot traffic may be much more cost effective,” E-Commerce News reckons.

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