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Ikea to cut prices in Japan: A furniture price war?

July 28, 2009
By Ken Worsley


Two months after rival furniture retailer Nitori’s announcement that it would cut prices on 400 items by 15 to 40 percent, Ikea announced on Monday that it plans to cut prices on 1,450 items by an average of 25%.

Nitori is Japan’s largest furniture retailer, and it has reported stunning figures for its most recent quarter, with sales up 15% to 76.7 billion yen in the March-May quarter. Nitori initially predicted a 2% rise in sales for the year through February 2010, though that has been revised upward to a projected 14% increase.

According to the Nikkei, Nitori has cut prices five times since May 2008, and each instance has led to an increase of customers walking through its doors - Nitori reports a 16% increase in customers visiting its shops in the first quarter of this year.

A quick look through the company’s online catalogue shows cheap furniture indeed; little of it seems built to last.

How does Ikea fit into the Japanese furniture market? With only five locations currently open, the firm estimates that first year sales will be at about 52 billion yen - the books close at the end of August. This would make Ikea the third largest furniture retailer in Japan.

However, will price cuts hurt profitability at Ikea? The firm recently opened a distribution centre in Aichi, which should allow for lower costs that can be passed on to consumers. With further openings planned in western Tokyo, Fukuoka, and near Nagoya, Ikea seems to be taking an ambitious course of action that should considerably boost its sales figures, though it’s worth noting that Ikea’s full-year sales projections are still lower than what Nitori sold in the last quarter alone.

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Comments

3 Responses to “Ikea to cut prices in Japan: A furniture price war?”

  1. Christopher Pellegrini on July 28th, 2009 1:24 pm

    Nitori is a great place for the business bachelor, young families, and college kids. They have all the standard items of furniture (Japanese standard, that is), and all the odds and ends that you might need for your bedroom, kitchen, and bathroom.

    There’s not a whole lot of creativity going on at Nitori, however, and you generally get what you pay for. In my experience, you rarely get more than what you paid for.

    If IKEA spreads out across Japan according to plan, then Nitori is going to have to increase the variety and creativity of the items it sells.

    Or they could just offer free shipping, and that might win people over. IKEA’s shipping fees have gotten progressively more expensive since the first outlet opened in Minami-Funabashi a couple years ago.

  2. David H. on July 31st, 2009 3:40 pm

    I am amazed that IKEA is making any profit. When I go, I see more folks looking than buying–sorta like a visit to Disneyland. The furniture is second-rate, but I guess ok by Japan prices and standards. Better than Itoyokado.

    As mentioned, the absurd shipping costs and the assembly time add enough to eliminate much real savings.

    Then, add the cost to IKEA forthe big highway bus from Denenchofu station to IKEA which often runs nearly empty. I don’t know how they do it. I had expected them to withdraw again by now.

    I like the hotdogs though.

  3. Diskussion Japan allgemein - Seite 8 - Aktienboard on August 3rd, 2009 6:12 pm

    […] full-year sales projections are still lower than what Nitori sold in the last quarter alone. http://www.japaneconomynews.com/2009…ure-price-war/ –> Sales up, prices down, profit margin down? Gruß, Swai __________________ […]

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