Roger Neckelius
Chairman of the EBC Retail and Wholesale Committee
Finding smart solutions to fit market requirements, yet not compromising on one’s principles is a difficult balancing act anywhere. But in Japan, to do that, you have to sort out the must’s from the maybe’s amongst all the business “rules” and myths about consumer behaviour.
In 2003 I was asked to join IKEA’s Tokyo team. By then I had worked for the company for 14 years, but actually I have known IKEA for much longer. I was born and grew up not far from where it all started in Småland in the south of Sweden, and I remember my mother taking me to the opening of the very first IKEA store when I was five years old.
After graduating from university with a degree in software engineering and software development, I worked in IT consulting for a major Swedish retail bank, Svenska Handelsbanken, and for Ericsson in the telecom sector. In 1989 I joined IKEA at their hometown in Älmhult where at first I was responsible for developing and implementing new software for the company’s distribution function; later I joined the group staff management team, and in 1997 I became the first CIO of the company.
My first assignment in Tokyo was dealing with the import of IKEA goods, distribution channels and in-store logistics. In the process I learned a great deal about local laws and standards, especially on labelling and product certification, as well as how to securely install our huge storage racks to withstand earthquakes. It was very important to have good Japanese advisors from the same industry to be able to manoeuvre these tricky waters smoothly. It is a “must” to get legal requirements right and to follow the Japanese rules or else you can get into enormous trouble. This experience and knowledge helps me now in my work at the EBC, tackling the many unresolved issues of product labelling and certification.
While certain market conditions cannot be changed easily, some others are actually not set in stone as one is made to believe. I was told that a low price would not work in Japan, as it would be associated with poor quality. IKEA’s principle is to sell low-priced, well-designed home furniture. There seemed to be a conflict, but look what is happening now: every retailer is competing on low prices. People like a good deal, the Japanese are not different from consumers anywhere else.
If the price is low enough, and the quality is right, Japanese customers are prepared to compromise, and what they sacrifice is extra service and beautiful packaging. It was a great eye-opener for our customers when they realised how little the actual goods at our stores cost, but how much special packaging or delivery and assembly would add.
Many Japanese competitors bundle service prices such as delivery and assembly with the cost of the product itself, and create a package that hides these costs. Transparent pricing is educational for consumers; they start asking if they really need all those services they’d taken for granted. Given the choice, most consumers seem to opt for a low price and saving money on services.
East and West
A business advantage can come from an unlikely source, such as an economic crisis. Surprisingly, last year, IKEA’s sales were at the same level, or even better than, the year before. It seems that consumers are shifting their expenditures from, let’s say, travelling or buying a new car to spending on home furnishings. As people spend more time at home in order to save money, they pay more attention to how things look around them. In the past, spending on home furniture was very low in Japan compared to other parts of the world, but now it is gradually picking up.
Currently, I am heading commercial process development to make sure that all functions work together smoothly. What I will take away from Japan is a strong impression of my Japanese colleagues’ commitment. Once we have agreed on something, I do not need to worry about implementation.
In my free time I enjoy being with my wife. We live in a fifth-floor apartment, in Tokyo’s Sendagaya district, which contains IKEA items as well as Asian furniture. As at work, in our home too, we seek a smart way to combine the best of East and West.