Dating at IKEA China: Unexpected management challenge
The IKEA outlet in Shenyang, eastern China, is the largest outlet of the Swedish furniture giant in Asia. The branch, described in the column to have had difficulties because of free-riders, is located in Shanghai. / Korea Times file
By Hellmut Schutte, Jocelyn Probert and Sumelika Bhattacharyya
With well over 5 million visitors per year, IKEA’s Xu Hui store in Shanghai ranks in the chain’s top 10 worldwide revenue generators — although the average spending per customer is relatively low. The 35,000-square meter floor space store is bigger than typical outlets in Europe but the smallest of IKEA’s 11 stores in China. It is also unusual because it is in the city center and 60 percent of its visitors arrive by public transport.
In comparison, IKEA’s newer Shanghai Beicai store, its largest in Asia, has a big car park so most people arrive in their own vehicles. An even bigger third store is scheduled to open in Shanghai’s nearby Baoshan District in 2013. Compared with both of these outlets, by mid-2012 the Xu Hui branch was beginning to look a little tired.
Part of the IKEA concept is to provide a spacious, clean location where customers shopping for affordable home furnishings can rest and eat Swedish-inspired meals and snacks. The goal was to encourage customers to stay longer in the store. The restaurant did not operate as a profit center but as a marketing tool, to support the customer service ethos.
A Chinese seniors’ “dating club” adopted IKEA Xu Hui’s restaurant as the venue for its twice-weekly meetings. Interested seniors simply had to register online and pay 10 yuan to an organizer. They stood out from ordinary shoppers at the store because they spent the day in the restaurant actively socializing, listening to their radios, eating food they brought from home and drinking the free coffee to which they were entitled as IKEA Family Member cardholders (registration was free and easy).
Arguments sometimes broke out between dating club members, and one man threw hot coffee at a security guard when he tried to intervene. Ordinary IKEA customers were becoming upset that every Tuesday and Thursday there was no space for them to relax and eat in the restaurant.
IKEA staff members were also unhappy about what was going on: the store’s ambience was disrupted and sales suffered on dating club days as none of the club members bought items from the store and they spent very little money in the restaurant. The problem grew as club meetings became more and more popular.
At first, in 2009, when there were fewer than 250 seniors participating, IKEA co-workers felt they could cope, but when numbers climbed to around 700 in 2011 it was clear that a solution had to be found. However all efforts to identify the organizer were unsuccessful.
“We want to be nice, but there are limits!” said store manager Jerome Deloix to his fellow managers. Ruefully he reflected: “If you have a weakness, people will find it immediately.”
IKEA’s China headquarters firmly rejected Deloix’s initial proposal to stop the free coffee for all IKEA Family Members in order to discourage the seniors’ dating club. He had to find another way to remain true to IKEA’s deeply-held customer service concepts while avoiding alienating the seniors’ community and also minimizing the dating club’s negative impact on customers and co-workers.
Eventually Deloix and his team defined a specific area in the restaurant where the group — along with other IKEA Family Members who were drinking only the free coffee — could meet, and provided them with special green cups for their coffee.
Both measures were an effective way to restrict the number of these "free customers" without turning them away. In addition, extra security guards were posted to keep order and notices were posted at the restaurant entrance asking for good behavior and banning shouting, radio-playing and knitting.
The result was a decrease in the number of dating club members who used the restaurant as a meeting place. Deloix explained, “We can’t solve this problem, so we have to manage it in the right way. It takes time to change people’s habits.”
A year later, dating club members are still at the store, sharing the assigned section of the restaurant with other free coffee drinkers. There is a plan to do a phased renovation of the store in 2013, a project that may start with the restaurant. Perhaps by the time the remodelled store fully re-opens in 2014, the seniors dating club will have gone to look for romance elsewhere.
Although IKEA operated highly standardized stores in many countries, the behavior of local consumers varied considerably. The Shanghai Xu Hui store manager had to think creatively to prevent the challenging activities of a particular segment of his local population from harming IKEA’s reputation, while retaining the service concepts that lay at the core of the store group’s operating ethos.
Hellmut Schutte is the vice president and dean of China Europe International Business School, Jocelyn Probert was a visiting researcher and Sumelika Bhattacharyya a former research assistant at CEIBS.