Who Says You Can't Buy Furniture Online? The Industry Is Changing | The 2015 Youth Trend Series

IKEA has been slow to sell online, but the furniture industry has not waited for it. Cheap furniture was the first to find its market on the internet, and ambitious online brands that want to sell quality may soon get their chance.

Liu Tian, in his early thirties, would very much like to know why IKEA, the Nordic home brand young people love, has been so slow to offer online shopping.

He has always thought of IKEA as fashionable. In 1998 it opened its first store in China, in Shanghai. Unlike the furniture malls that were thriving at the time, IKEA sold clean, bright Nordic-style products and showed them in a new kind of model room.

Young people were the quickest to take to the new style and the new way of buying. Feng Su, founder of Haohaozhu, a home-sharing community, found that from then on Chinese furniture buyers split into two distinct circles, one traditional and one young. Put another way: one that doesn't like IKEA and one that does. "When it comes to the home, IKEA has played the role of public educator in China," Feng said.

Yet in the 20,000 home submissions Haohaozhu has received over the past two years, Feng noticed that people in the young circle like to talk about IKEA, "but when it's time to buy furniture, they don't really want IKEA furniture and housewares anymore."

Young people, especially in first-tier cities, have taken the standard IKEA set and started looking for alternatives beyond it.

Many of them have turned to the internet. In June this year Shu Wei founded Zaozuo, an online platform for furniture designers. Like most new brands, it hopes to take over the young consumers IKEA has cultivated in first-tier cities. Shu describes them this way: heavily shaped by the internet, still renting two or three years after graduation, regular IKEA shoppers. But once they start a family, earn around 200,000 yuan a year and have developed decent taste, they may come to Zaozuo to look for overseas designers they have half heard of and pick the designs they like themselves.

The platform is modeled on made.com, a British home e-commerce site founded five years ago. Its sales have grown sharply in recent years. Last year it sold £43 million of furniture in the UK and several other European countries, and it is preparing to list on the London Stock Exchange.

Zaozuo looks better suited to consumers who care about creativity and design

In the UK, made.com pioneered this e-commerce model

Even so, some established home brands, IKEA among them, believe people are still very cautious about buying furniture online. "If you were buying furniture yourself, would you buy it without touching it first?" Zhu Changlai, president of IKEA China, asked in an interview last month. And this, she said, though they "of course know Chinese consumers are very enthusiastic about online shopping."

In fact, furniture is not as special as people imagine, at least for some young people.

"Mao Shiba," born and living in Shanghai, belongs to the post-85 generation. She once benefited from IKEA's model rooms and storage designs, but she has not been to an IKEA in at least six months. Like most young people, she knows the street wisdom about IKEA: if you are ready to replace things every three years, even IKEA's large furniture is worth buying. Early last year, furnishing a home on her own for the first time, a 144-square-meter apartment, she bought all the large furniture on Taobao, including a four-piece oak bookcase set for 14,200 yuan. Beforehand she had looked up the going prices for the wood, so the purchase seemed both safe and good value.

In the past, most people lacked this basic knowledge of furniture. They had a distinctly Eastern attachment to wooden furniture but did not know whether black walnut, Manchurian ash or oak cost more. Fortunately, people under 40 have started looking up this kind of information online. And Haohaozhu's data show that 25-to-35-year-olds like "Mao Shiba," as they gather information, are also more willing to buy home goods online, even large furniture.

"It's completely different now," Liu Tian told QDaily. More than anyone, he believes the good times for buying furniture online have arrived.

Liu founded Taobao's home furnishing category in 2009, when even furniture makers thought people would never buy furniture online. Had they been asked six years ago the question IKEA is still wrestling with, they would probably have given the same answer as IKEA China. Most of them turned down Taobao's invitation to sell online.

That has changed over the past few years. In 2014, home furnishings were Taobao's best-selling category after clothing. You may have heard that Linshi Muye, a home brand from Foshan, sold 510 million yuan of goods on this year's Singles' Day. But young people may prefer smaller brands, which together offer more than a hundred million home products on Taobao. Eighty percent of large-furniture sellers already offer free delivery and installation.

Liu thinks quantity is the internet's greatest advantage. He is right: in an IKEA store of tens of thousands of square meters, startlingly large, you can see more than 9,000 products. Yet even after filtering Taobao's hundred million-plus products for those he considers "best in design, quality and service," Liu still picked about 10,000 home brands and 700,000 products for Jiyoujia, a new platform launched this August.

Jiyoujia is tied very closely to Taobao, for better and for worse

The new platform aims to give 25-to-35-year-olds in first- and second-tier cities "IKEA-style," systematic goods and services, while also offering choices beyond IKEA: "In style alone, it's more than Nordic."

"We want to be the online IKEA," Liu said confidently, adding: "The culture, the outlook and the taste for diverse lifestyles that people born in the 1980s have absorbed are more than a store can satisfy."

Jiyoujia has also brought extra traffic to its merchants, reaching 600,000 visits a day less than half a year after launch.

But the home brands on it that have already begun to stand out clearly want more, and they dislike the "online IKEA" label. If they win over some of the consumers IKEA cultivated, they say, it will be because their brands offer a "better" choice than IKEA, not because selling online made the difference.

"Most of them (home brands on Taobao) aren't online by choice. Offline channels are just too expensive," said Zhao Lei, who three years ago founded the home brand Muzhi Gongfang in Hangzhou. It sells only on Taobao. When Jiyoujia invited him to join, Zhao said no, and he now thinks he made the right call: "I wanted to be several tiers above IKEA. And now you're telling me I'd be selling inside an online IKEA?"

Benlai Design got the same invitation. Three months after joining, its designer Zhang Fei realized the platform was not quite what he had imagined. "Now I find they (Jiyoujia) are moving too fast and pushing too hard. They let everything in."

Although Liu says the platform sets a minimum price for products, Jiyoujia still looks "like a little Taobao." It promotes the original design brands on the platform heavily, holds offline events for them from time to time, and has even taken some of them to the Asia Design Management Forum (ADM). But it has also brought in many export factories. Liu says these factories are experienced and make goods for leading foreign brands and designer labels.

"What we promote is a lifestyle," Liu said, not any particular brand.

Liu's decision rests on one view of the home industry: its brands are extremely fragmented. According to the 2014 China Building Materials and Home Furnishing Industry Development Report, published by the China Building Decoration Association, Chinese consumers spent about 800 billion yuan on furniture and home accessories in 2014. By that measure even IKEA, whose China sales reached 10.5 billion yuan in fiscal 2015 (September 2014 to the end of August 2015), holds only 1.3% of the market.

But for young people, a lifestyle is always bound up with brands. Haohaozhu's observations of consumers bear this out: users do care about brands, but because brands are so fragmented, "it's more like every brand has its own fan club behind it."

What new home design brands care about most right now is how to turn these young online furniture buyers into their own fans, rather than being just an online substitute for something else.

Furniture from Muzhi Gongfang has a touch of Muji about it

Zhao Lei is trying to get Muzhi Gongfang out from the shadow of early IKEA and Muji. That resemblance once drew many young customers to Muzhi Gongfang, and barring surprises its sales this year will top 20 million yuan. But in an interview with QDaily last month, Zhao stressed: "Design adds value to wood." He means, for example, adding curved details to a square, boxy outline. "They like these slightly more human touches. They don't add much cost, but they add a lot of value."

"Mao Shiba" agrees. The curves of the furniture brand Ming'an and the streamlined shapes of Fanji made a strong impression on her. Young consumers are happy to believe that such pieces require molds that are hard to make and waste material, a "more advanced craft" that is worth paying more for.

But the main reason young people buy furniture online? "In the end... it's the price." More precisely, they can buy good things at low prices, not just "cheap stuff."

The internet can cut costs such as distribution and inventory, which pushes retail prices down while keeping profit margins at around 50%, enough money for a brand to keep growing. Zaozuo, mentioned earlier, is a good example. It takes orders first and makes the furniture afterward, which solves the problem furniture companies have always had with inventory and the space it takes up.

Designers including Zhao Lei and Zhang Fei are strong advocates of flat-pack packaging, a smart idea they credit to IKEA. "If you want to move the industry forward, it can't just be about building a platform and selling things. You have to get into the supply chain," Zhao said, just as IKEA did at the start.

Zhao admires IKEA and has more than once expressed his respect for it. Asked whether IKEA has run into trouble in China, he replied: "How could IKEA have trouble? In that lowest-price, mass-market space it is extremely, extremely strong. We actually can't compete there anymore. We have to go beyond IKEA. That's certain."

But these young brands now see that even if they avoid a head-on fight with IKEA, finding another way past it is not easy. IKEA also taught consumers to walk through stores and "experience" home furnishings. They even hope to come across their future home in a store.

So when they go online to furnish a home, convenience is not the only point. If they can, they still like to visit a showroom or factory to see the real thing, then enjoy free delivery and installation. made.com has seen its sales soar this year. Its founder said in an interview that physical showrooms are what push people to buy designer home products: people go and see the real pieces before they buy. made.com is still adding showrooms and fitting them with technology that links online and offline to make buying online easier. Muzhi Gongfang also opened an offline showroom this year for local customers in Hangzhou. And a few brands, Fanji among them, have opened a small number of standalone stores.

Fanji's store near the Imperial College in Beijing

Offline stores are still expensive, though. When these online brands move offline, they find that how people shop in a physical home store is a whole new subject. "When you display forty or fifty pieces, these young customers say, hey, why only forty or fifty? But when you display a hundred, they're still not satisfied: why not two hundred?" Feng Su is probably right about the reason: "The users (of internet home brands) are heavily influenced by IKEA. They always hope for a place like IKEA that has everything."

What's more, IKEA's stores in China are bigger than those in other countries. According to Forbes, eight of the world's ten largest IKEA stores are in China. It has all but spoiled consumers.

That also makes it hard for IKEA to quickly make its online and offline experience consistent. Still, Zhu Changlai pointed out that this problem is far harder than solving free delivery and installation, which is what Jiyoujia talks about, since Jiyoujia started out on the internet. In a sense, this is where IKEA is stuck.

"Everyone is still feeling their way on how to make online and offline consistent, the customer experience consistent, including consistency from store to store. A consistent experience of products and services," Zhu said. "Chinese consumers will expect more of it than consumers in other (countries)."

Seen this way, established home brands have their reasons for being careful about online shopping. After all, these increasingly mature young people turned to the internet because they wanted better products and experiences, not because they were set on the internet itself. Figures from Liu Tian show that in first- and second-tier cities and third- and fourth-tier cities alike, online sales account for only a little over 10 percent of home furnishings, half the share for clothing.

It also means that to attract young people, or keep them, online brands will have to beat more offline rivals.

The Danish furniture brand HAY has opened a store in Tianzifang, a Shanghai neighborhood popular with "arty youth." It has now moved its factory to China too, and plans to open a new store in Beijing to meet the fast-growing demand from young people in China's first-tier cities.

The Danish brand HAY in Shanghai's Tianzifang

Among young people, Muji is nearly as popular as IKEA. Some people in the furniture trade say Muji earns lower profits on home products than on its other goods, yet the Japanese retailer has still expanded the range because it sees demand. According to figures Muji provided, its furniture sales grew 28.1% over the past two fiscal years.

Muji has also opened several large new stores in China, partly to prepare for bringing in IDÉE, a Tokyo home brand with a more fashion-forward design sense. In an email reply to QDaily, Muji said IDÉE hopes to attract people who "value emotion or humor more, consumers who find something slightly lacking in the ubiquitous goods that care only about function."

Muji has brought in the Tokyo home brand IDÉE

That may be the best description of where young home consumers are heading.

IKEA's competitors increasingly describe it as a supplier of functional home products. IKEA, they say, "can't offer consumers a higher level of taste, or it would be targeting the wrong customers."

In fact, though, the inexperienced young shoppers who first attached themselves to IKEA are spending on their homes more and more often, buying home accessories, bedsheets and textiles now and then, even while they still live in rented rooms or even school dormitories. That is why IKEA has teamed up with fashion designers on more distinctive prints. What should really worry IKEA is that a growing share of these items is sold online. Its caution about selling large furniture online could eat into the small home goods sales it used to be proud of, and become a problem for it in the future.

In Feng Su's view, something else of great importance is happening in the home industry. "The people making home-buying decisions in China have changed dramatically. Almost overnight they've dropped from people in their forties and fifties to people in their twenties and thirties. Traditionally, older Chinese didn't think about furnishing a home until they married and settled down. But most young people now live on their own, so they face the question of where and how to live much earlier," Feng said.

Young people have this decision-making power for the first time, and where they place the order is certainly not what they care about most. But in winning them over, young brands that have risen on the internet may still have a better chance than established ones. After all, getting into people's living rooms means becoming part of a group's way of life, and that doesn't happen overnight.

"It's like waiting for wood to season," said Liu Chunjie, home director at Markor Home. "This definitely takes time too, right?"

Cover image from Wordpress