Analysis of Localization Level of IKEA China's Supply Chain

According to the latest data, the localization level of IKEA China’s supply chain has reached a quite high level. The following is a detailed analysis:

• Approximately 80% of products sold by IKEA in China are sourced locally from China [1]
• Globally, approximately 25% of IKEA’s products are sourced from the Chinese market, making it one of China’s largest sourcing countries [1]
• In the Asian market as a whole, the local procurement ratio of IKEA products is as high as 80%, while it is approximately 70% in the European market [2]

• Mattress Category:
  100% supplied by Chinese suppliers, achieving full localization [2]
• This strategy mainly targets large and heavy products to reduce logistics costs

• IKEA adopts the strategy of “Produce where you sell”
• Products for the European market are sourced from Europe as much as possible, while products for the Asian market are sourced from Asia as much as possible

• IKEA emphasizes establishing long-term cooperative partnerships with suppliers
• “Shared Values” (shared strategy, shared philosophy, shared goals) is the foundation of cooperation
• Achieve stable quality and cost optimization through long-term cooperation

• China’s advantage as the “World Factory” still exists, and its industrial chain is becoming increasingly mature and environmentally friendly
• China’s automation, digitalization, and industrial upgrading are highly aligned with IKEA’s strategy

• Diversification strategy: including product diversity, material diversity, and supplier diversity
• Both industry leaders and “small but excellent” suppliers are needed
• Ensure supply chain stability and rapid response capabilities

• Some raw materials and products still need to be transported via cross-border logistics
• Compared with local brands, price competitiveness is still limited
• International transportation costs are an important factor affecting pricing

• Invested over RMB 400 million in price reductions in FY2024, covering more than 500 products
• Continue to increase the local procurement ratio to reduce logistics costs
• Optimize logistics efficiency through modular design and flat packaging

The supply chain localization of IKEA China has important strategic value for its overall business:

1. Cost Advantage:
   Reduce international transportation costs and enhance price competitiveness
2. Response Speed:
   Respond faster to changes in market demand
3. Sustainable Development:
   Reduce transportation carbon emissions and support environmental protection goals
4. Risk Diversification:
   Avoid over-reliance on a single market or supply channel

[1] China Daily - “Ikea to sharpen its edge in supply chain” (https://www.chinadaily.com.cn/a/202312/05/W656e7c91a31090682a5f1706.html)
[2] Fortune China - “IKEA: The Structure and Consumption Habits of Chinese Consumers Have Changed” (https://www.fortunechina.com/lingdaoli/c/2024-10/10/content_458917.htm)
[3] Linkshop/ CBNData - “IKEA China Closed 7 Stores in a Row: Is Big-box Home Furnishing Store Business Struggling?” (https://m.cbndata.com/information/294875)