IKEA Bans Proxy Buyers in Beijing, Shanghai

Swedish furniture designer and retailer IKEA opened its first China store 15 years ago in Shanghai. Since then, the chain has expanded to seven other mainland locations, including Beijing, Guangzhou, Chengdu, Shenzhen, Nanjing, Dalian and Shenyang.But for the bulk of the country, IKEA’s products remain inaccessible due to aggressive delivery fees tacked onto purchases made through the company’s official store.IKEA is known in second-tier cities and the countryside for selling modern furniture designs at low prices.

To meet demand for IKEA products, a second industry of proxy buyers has developed. The agents present IKEA products at their online stores and showrooms and provide purchasing, delivery and assembly at a fraction of IKEA’s fee. This week, the retailer began banning these bulk purchasers from its outlets in Beijing and Shanghai to “protect end buyers.”

“The number of these buyers is very limited, and we give them warnings the first few times we see them,” Wang Zhiling, a clerk, said of the repeat faces.

Proxy agents have responded with anger.

“I started my business of reselling goods from IKEA Beijing 10 years ago. It’s crazy that we’re being stopped not by the authorities, but by IKEA’s own discriminatory practices,” said Wang Yajun, an agent running an IKEA shop.

Official IKEA delivery costs 60-80 yuan per cubic meter, depending on the size and shape of the product, the distance the recipient is from an IKEA store and the floor the home is on. Most precuts cost between 300 and 500 yuan to deliver, making proxy buyers a popular alternative.The IKEA proxy purchasing industry has grown so big that an estimated several billion yuan pass through the hands of the buyers each year.

IKEA said it plans to open between eight and 10 malls in second-tier cities during the next five years.

“IKEA, like many foreign multinational corporations, has faced many unexpected challenges and lost business opportunities in operating on the mainland,” said Song Liqun, a professor of business at Beijing Technology and Business University.

Song said IKEA’s best option is to lower its delivery fees to make the official IKEA store more competitive with the proxy agents.However, he also said the proxy agents have unrealistic expectations about the longevity of their industry. Logistics is developing rapidly in China, and as the country becomes more connected, the price of official delivery services is bound to fall.Many proxy sellers are beginning to recognize their industry is unlikely to survive in the long term.“More and more consumers who like IKEA products own private vehicles,” Wang Yajun said.

“It’s making it very difficult for us to attract new customers who have the money needed to buy these goods.”

Swedish furniture designer and retailer IKEA opened its first China store 15 years ago in Shanghai. Since then, the chain has expanded to seven other mainland locations, including Beijing, Guangzhou, Chengdu, Shenzhen, Nanjing, Dalian and Shenyang.

But for the bulk of the country, IKEA’s products remain inaccessible due to aggressive delivery fees tacked onto purchases made through the company’s official store.
IKEA is known in second-tier cities and the countryside for selling modern furniture designs at low prices.

To meet demand for IKEA products, a second industry of proxy buyers has developed. The agents present IKEA products at their online stores and showrooms and provide purchasing, delivery and assembly at a fraction of IKEA’s fee.

This week, the retailer began banning these bulk purchasers from its outlets in Beijing and Shanghai to “protect end buyers.”

Official IKEA delivery costs 60-80 yuan per cubic meter, depending on the size and shape of the product, the distance the recipient is from an IKEA store and the floor the home is on. Most precuts cost between 300 and 500 yuan to deliver, making proxy buyers a popular alternative.

The IKEA proxy purchasing industry has grown so big that an estimated several billion yuan pass through the hands of the buyers each year.

IKEA said it plans to open between eight and 10 malls in second-tier cities during the next five years.

“IKEA, like many foreign multinational corporations, has faced many unexpected challenges and lost business opportunities in operating on the mainland,” said Song Liqun, a professor of business at Beijing Technology and Business University.

Song said IKEA’s best option is to lower its delivery fees to make the official IKEA store more competitive with the proxy agents.

However, he also said the proxy agents have unrealistic expectations about the longevity of their industry. Logistics is developing rapidly in China, and as the country becomes more connected, the price of official delivery services is bound to fall.

Many proxy sellers are beginning to recognize their industry is unlikely to survive in the long term.
“More and more consumers who like IKEA products own private vehicles,” Wang Yajun said. “It’s making it very difficult for us to attract new customers who have the money needed to buy these goods.”

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