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Opening the IKEA China area "price cut tide" mystery is not a simple promotion
As the largest distributor of global home furnishing, IKEA (view map) has always been unable to escape the speculation and attention of its outside world. Recently, on the 1st of IKEA's September 1st, the retail price of more than 500 products in China has been lowered. The news of the decline of up to 20%~30% is spread online. Why is IKEA, which has always been at a low price, why is it a big price cut on a low-cost basis? This is a question worth pondering. In my opinion, IKEA's price cut is not a simple price promotion, but has its profound meaning and connotation. First of all, the timing of IKEA's large-scale price cuts seems slim. Not long ago, the head of a domestic giant chain home business company once claimed that the home industry has gone out of the crisis, why IKEA will resolutely choose a "price"-led competition strategy? This may explain two problems: if domestic home The judgment of the head of the giant is true, then it shows that the business situation of IKEA has not increased due to the warming of the home industry; if IKEA's large-scale price reduction is to cope with the dilemma of the overall business environment of the home industry, then, in turn, The home industry has not really warmed up, so the judgment of the aforementioned person in charge is a mistake. From the author's concern about the home industry, I personally think that the home industry should be in dire straits, and there is no tendency to pick up, because the appearance of most companies' recovery is only from the moment that the company sacrifices its normal interests. Lively situation. During the period, low prices have become a key means of attracting consumers and boiling the market. The large-scale price cuts by IKEA are all about raising the performance of this year's business performance. Secondly, IKEA's large-scale price cuts appear to be sudden. After undergoing a series of measures to dismantle institutions and lay off personnel in the first half of the year, in order to reduce operating costs and maintain the steady growth of profits in China, IKEA's re-price reduction behavior proves the difficulties faced by its operation in China. Although there will be different price reduction promotions for different products on weekdays, the overall price reduction of large-scale goods also indicates that it hopes to attract the popularity of the store through the effect of scale reduction, on the one hand, to win by volume. Promote the continued stability of profits this year in the second half of the year. This also reflects the dependence of operating companies on price promotion measures in the sales of household products. Then, large-scale price cuts are accompanied by clearing inventory to improve sales. The collective promotion of nearly 500 items at once, although it is not too large compared with the size of tens of thousands of products in the store, it is still a bit surprising compared to the previous single product promotion. Although the media does not specify the list of these price-cutting products in detail, according to experience, in the promotion process, the products with the largest profit are generally slow-selling backlogs or outdated old products. This can lead to the sales of other products in the store through the scale effect. Let the popularity of the entire store boil, and the blind consumer psychology of consumers will be greatly stimulated. Then, IKEA mass promotions or tactical transformation intentions. Although IKEA is at a low price, the market's feeling of high-end, petty-bourgeois sentiment in its price indirectly denies IKEA's position in the Chinese market. If IKEA wants to achieve low-cost commitment, then the price of the product must be adjusted, and the premise of adjusting the selling price is that its procurement and sales costs are reduced, and there is sufficient price advantage to compete with the products in the domestic wholesale market. . Otherwise, its low-price strategy will be difficult to implement smoothly, and it is difficult to achieve steady growth in sales and profits through price strategies. To achieve a real low price, IKEA must change its procurement channels on the one hand, and change its product structure on the other. Only on the premise that the procurement cost is greatly reduced and the product structure is effectively integrated, it is supplemented by the unique experience culture in the IKEA store. To enhance product connotation. But then again, a global company like IKEA has to be positioned in a low-priced market in the Chinese market. This business is indeed difficult. Finally, the change in the layout of IKEA China seems to be too hasty. Last time, the move of IKEA Beijing to build a large-scale shopping mall was questioned as it might transform into commercial real estate. This time, the establishment of the IKEA Shopping Mall, which is mainly responsible for the management of IKEA commercial property, clearly demonstrates its impulse to cross commercial real estate. Similar to the large-scale commodity price cuts in order to maintain stable profit growth in the second half of the year, IKEA enters the commercial real estate sector and expects to maintain its stable growth rate in China by extending its business scope. However, the urgency of behaviors, especially in the case that the overall industry boom has not really warmed up, rashly investing and changing the market positioning and operation orientation will undoubtedly bring uncertain risks to its future development.