http://maaketingu.blogspot.com/2011/12/even-ikea-can-fail.html

In 1974, Swedish giant IKEA decided to enter Japanese market with a local partner. It failed to win Japanese consumers' heart and withdrew in 1986. But their second attempt in 2006 is a success story.

Let's see why.

Story of Failure

One of the most characteristic features of IKEA is "Assemble Yourself" philosophy which reduces costs and results in low prices. Even their marketing statement is:

“Your partner in better living. We do our part, you do yours. Together we save money.”

Another characteristic feature of IKEA is its standardized product range which changes only 10% in different countries, in other words 90% of its product range is almost the same all over the world.
When they entered to Japanese market in 1974, they have only been in 4 other European countries yet. This was their first attempt outside Europe and although they lacked experience, they were quite sure that IKEA's unique philosophy would work well everywhere. They didn't think that any deep consumer insight would be necessary.
They opened a relatively small shop in Tokyo without changing their product range and applying the same strategy such as "Assemble Yourself" as in Europe.

| Those old good days.. |

Here are the two main factors why IKEA Japan failed on its first attempt:

1. Consumer Service: First of all, for Japanese consumers the quality of service is very important. When you go into a barbershop or a restaurant, staff would do everything to make you happy. And, you never give tips. (high quality without tips, I know I know, it's heaven!) Therefore, the idea of buying in ready-to-install kits from IKEA was not welcome by Japanese consumers. They were not used to that kind of "assemble yourself" self service approach.

| IKEA Instructions for Stonehenge |

2. Product Range: Japanese houses are too small. Especially Tokyo is a densely populated city, where land and rents are very high. Therefore, people live in very small flats. IKEA's product range was built for European houses and Japanese consumers could not find furnitures fit for their houses.

Typical small Japanese House |

3. Rough competition: In addition to the lack of experience and consumer insight, there already were many Japanese furniture companies (such as MUJI) dominating the market with their traditional approach.

And in 1986, there was no other choice for IKEA except withdrawing from Japan.

IKEA Japan CEO, Tommy Kullberg, commented for that attempt later:
“The Japanese market and consumers were not ready for Ikea, and Ikea was definitely not ready for Japan at the time”

Story of Success

When they come again in 2006, they had already been doing consumer research for 5 years in Japan. IKEA visited more than hundred houses, carried surveys and analyzed Japanese market and competition deeply with the help of JETRO, Japanese Foreign Trade Organization.

This research led to 2 main conclusions:

1. Large sofas, beds and tables which are top sellers in Europe would not attract Japanese consumers because they simply would not fit into their homes. 2. Providing home delivery and assembly (even for an extra charge) is necessary.

IKEA picked only 75% of their international product range. They opened a huge store near Tokyo, in an area full with furniture shops where the consumers rush to buy furniture. Ikea comprised 70 mini-showrooms on the second floor of the store with the same size of typical Japanese room in order to convince their understanding of small-scale living.

This time, instead of insisting on high quality with low prices , IKEA came up with the concept of "making an ideal home".

In 2008, their TV commercial aimed to educate Japanese consumers about "DIY culture" and to give the message : "A house not just for sleeping, a house for fun." Japanese consumers use their houses just for accommodation because of its size. (They even use "Love Hotel"s instead of their houses, but this is another story.)

Another scene from their 2008 campaign, pointing out that IKEA furniture can fit everywhere giving the comfort Japanese consumers need. Even today, they support their consumers with "How to shop" guides.

This painful experience taught IKEA how important consumer insight is.
Since 2006, IKEA opened 6 shops in Japan and they have been quite successful.