Beijing // Even on a weekday afternoon, the Beijing branch of IKEA is packed. There are young couples looking at wardrobes, older ladies putting six-packs of glasses into their yellow plastic shopping bags and families enjoying free coffee refills in the cafe while being entertained by a band singing in Cantonese and English.
Some customers have taken the store's hospitality too far and are asleep on the showroom beds. Liu Zheliangjun, 20, a student who is visiting the store with his girlfriend, says IKEA is particularly popular with young Chinese moving into their first home. "They don't have much space so they need simple things," Mr Liu says. "I don't like traditional furniture. I don't think many young people like it. It's too complicated."
Simple furniture is becoming "more and more popular", says Zou Aimei, 45, a civil servant. "This type of furniture looks quite good in a small space and quite a few of my friends are buying from IKEA." It would seem the Swedish furniture retailer's plan of low prices and easily assembled products is a hit with China's growing number of middle-class homeowners. But many of the foreign furniture and home-decorations chains that have landed in China have found the market harder going than expected.
IKEA's first store in China opened in Shanghai in 1998 and since then the chain's expansion has been modest, given the size of the market and the company's growth in other countries. There are now seven IKEAs across the country. The British home improvement chain B&Q has also faced hurdles. It moved into China a year after IKEA and expanded much more briskly until its store tally reached 63. But last year after losses of £52 million (Dh299.5m) in China the previous year Kingfisher, the owner of B&Q, announced a major downsizing of the operation.
It marked 22 stores for closure and a further 17 to be shrunk in size over two years. Officials partly blamed a contraction in the property market. Furniture retailers from North America are also yet to reap rewards from the Middle Kingdom. Home Depot, which is based in Atlanta, entered the Chinese market in 2006 when it took over the local chain Home Way. But growth plans appear to have been put on hold.
Frank Blake, the chain's chief executive, has said while the company's "objective is to have a real presence in China", it was "not going to roll out stores in China for the sake of rolling out stores". "It isn't unrealistic for a country that size with a market that different from the US to take a few years to figure it out. And that's what we're doing," Mr Blake said. Such caution is in stark contrast to the furious growth overseas supermarkets have enjoyed in the country. Last year alone, the French retail giant Carrefour opened 22 new stores in China. The world's largest retailer, Wal-Mart, opened 30. Between them, they have more than 300 stores in the country.
While supermarkets, local and foreign, are said to hold an 80 per cent share of the groceries market, other sectors have not been as fruitful. Li Fengjiang, the head of the local furniture and home improvement chain Orient Home, has estimated the majors enjoy only a 5 per cent share of their home improvement market, which he says is worth hundreds of billions of dollars a year. Paul French, a retail analyst with Access Asia, says the comparative lack of success of the home-improvement chains is "one of the weirdest things", given the vast increase in the number of private property owners in China and sharp rise in size of the average property.
The average Shanghai living space is now more than 18.5 square metres a person, compared with half that a decade ago. "None of these guys have made any significant amount of money," Mr French says. Foreign chains were initially perceived as being expensive and they have suffered from the competition from "aggregators", or warehouses that sell different brands. There are thought to be as many as 40,000 these across China, plus many smaller, family-run stores where "you can negotiate price", Mr French says.
IKEA has increased its marketing budget and cut prices, but that only means making profits is harder. "They've really had to slash their margins," Mr French says. "You ask the question how much lower can they go before they become a charity. B&Q did the same and they're closing stores." He says even Orient Home has not grown as fast as predicted. Amid these difficulties the major chains are having with their simple furniture aimed at cost-conscious consumers, there appears to have been a modest revival in interest in traditional Chinese furniture, such as carved wooden chairs and beds and painted screens.
In Gaobeidian, south-east Beijing, the trade in antique and reproduction furniture is said to be thriving. "The chain stores ? are targeted at the young people who are not well off and prefer a simpler lifestyle," says Zhong Mingjun, who runs Lan Ting Fang, which designs and makes traditional-style furniture. "But traditional Chinese furniture shows your social status and family background. People are becoming richer so they're more concerned about their living standards.
"Chinese people [also] have more confidence in their own culture, so there's been a revival." While some say the global economic slump affected sales significantly, others, such as Jiang Changfa, 49, who crafts reproduction furniture in a nearby workshop, hails "a revival of neo-classicism in China". "Confucianism and traditional culture [are becoming more popular], so there's now a market for this traditional furniture. The traditional style is doing much better than the European furniture."
Despite this enthusiasm for the traditional and competition from local rivals selling modern furniture, the foreign chains are not sitting back. Late last year, IKEA announced plans for a second store in Beijing and an outlet in the city of Wuxi, saying this would lead to "accelerated development" in China. B&Q, after taking a hit, saw its sales in China increase by 8.2 per cent in the second quarter of this year from the year earlier.
Continued growth in the number of urban residents - their ranks increase by about 15 million a year, official figures show - is likely to bring opportunities. But despite the stores seeming busy, luring big-spending customers may remain difficult. "I've already chosen some traditional furniture. I'm just here to pick up some decorations," says Qi Xiaoluo, 28, at IKEA's Beijing store. email@example.com