IKEA's challenge to Korean market!

Will they have to affiliate with in-country logistics firms?
by Young Il Hahn /Cheol Min Kim

[CLO]IKEA, Sweden based furniture giant, established a corporation in Korea last year. Domestic furniture market is already under alert. Logistics industry should watch it carefully as well because IKEA represents DIY(Do It Yourself, the way consumers assemble and install something themselves) goods and is much dependent on logistics service due to their distinctive distribution system.

The related specialists express common opinions that more than even chance of IKEA's success in Korea rests on how to optimize domestic logistics system. That is why in-country logistics field gets excited about IKEA's advance to Korea.

Particularly when IKEA secures their position in Korean market, there is high probability that Korea may stand out as logistics base in North East Asia. IKEA seems to have judged that Korea could be bridge-head for their success in Asian market, especially China.

It might be attractive for domestic logistics companies hoping to enter overseas market to be a partner of IKEA that already has international distribution network.

Nevertheless, there still remains plenty of things for which internal logistics firms have to prepare prior to such rosy projections. It's because there are a number of cases that overseas DIY firms like B&Q ever came into Korean market and failed.

Korean logistics firms might have big trouble if they made an investment in advance only believing that IKEA is 'always lucrative'.

Then how did IKEA succeed in co-operating with logistics partner in Japan?

Market specialists caution in one chord against vague hope that domestic market dominion could be changed in a flash provided inexpensive furniture rush into Korea.

A staff specializing in transporting furniture mentioned "It may be asked whether IKEA's peculiar system and their DIY products are able to succeed in Korean market. They have to know that Korean furniture manufacturers provide package service from delivering finished product to its installation."

Actually delivery cost is not included in IKEA's product price as the goods are sold on customer's self-building and assembling premise. The company appears to be in a passive position in terms of delivery, installation and counselling services. IKEA has ever withdrawn from Japan in 1986 through business failure due to absence of DIY culture.

Re-entering Japanese market in 2006, however, IKEA reinforced delivery·installation·assembly services in association with Mitsubishi logistics based on the experience of past failure. Upon launching delivery service, consumers even not having goods wagon like SUV began to flock to IKEA.

For instance, delay of delivery happened insomuch on Sunday resulting from full reservation till the following week. IKEA Japan was barely able to control swamping orders by limiting delivering number to 3 per person and raising delivery fee. There wasn't any assembly service at the beginning but some stores started to provide assembly or installation service at certain cost as consumer's demand increased.

IKEA products are not usually sold through internet but on store's site, nonetheless the company is now fulfilling consumer's requirements in Asian countries by way of receiving orders online and delivering goods for urban customers via purchase agency.

IKEA is complementing their services in this manner to expand stores strategically in Asia, where DIY culture has not been established yet. IKEA succeeded in re-entering Japanese market and opened 6 stores all over nation by 2011. Opening Fukuoka store is just around the corner.

Based on the experience in Japan, China and Singapore markets, they are likely to exercise the way of expanding delivery and installation services as well in Korea.

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