Summary of Key Points
IKEA is selling 8 idle large store properties in locations such as Baoshan, Shanghai, and Panyu, Guangzhou (all of which are closed stores), marking the largest disposal of its own-owned assets since entering the Chinese market 28 years ago. At the same time, IKEA is transitioning from a model of large stores to smaller ones, coupled with an increased focus on online sales: it plans to open community-based stores approximately 1,500 square meters in size (about 1/20 the size of its larger stores) and is piloting instant retail services like Taobao Flash Sales. The reasons for this transformation include the unsustainable heavy-asset model of large stores (due to a cooling real estate market and high operating costs), declining sales (with sales volumes down nearly 30% compared to the peak in 2019), as well as competition from domestic brands and changes in consumer behavior. However, this transition also presents contradictions: while efficiency may increase, IKEA could potentially lose its core advantage of providing a "lifestyle experience."
1. Large Stores Becoming a Burden: From Valuable Assets to Costly Liabilities
IKEA previously insisted on owning and building its own stores because, during the rapid growth of the real estate market, large stores served both as retail outlets and valuable assets (with land appreciation and commercial revenue). However, with the real estate market cooling (development investment decreased by 15.9% in the first 11 months of 2025), large stores have become a liability:
- High Costs: The Baoshan store in Shanghai covers 105,000 square meters, and the Tianjin store covers 79,000 square meters. Fixed costs such as land ownership, maintenance, and staffing do not decrease with fewer customers; additionally, parking lot vacancy rates are rising, resulting in long-term "high investment with low returns."
- Declining Sales: Sales in fiscal year 2024 were 11.15 billion yuan, nearly 30% lower than the peak in 2019. For fiscal year 2025, IKEA will no longer report separate Chinese sales data, and the group's global profits have declined by more than 25%. Selling large stores allows IKEA to recoup cash and get rid of inefficient assets, which is a necessary move to stop losses.
2. Smaller Stores: A Lighter Approach, but at What Cost?
The core value of IKEA's large stores has never been just selling furniture; it has always been about creating a "lifestyle experience" through shopping:
- Large Store Experience: Stores with 100,000 square meters feature bedroom and living room showrooms where customers can "immersively envision their future home," while also buying accessories like shark toys or eating meatballs, and even taking photos for social media (with many "IKEA shopping guides" online).
- Changes in Smaller Stores: The Tongzhou store is only 1,500 square meters, with a reduced range of products (focusing on the most popular items), no warehouse or restaurant, and smaller showrooms. Customers have reported that the shopping experience is similar to that of a supermarket, with less customer service (even finding a tape measure is difficult).
The appeal of IKEA—where customers were willing to spend half a day browsing even without a specific need for furniture—is being replaced by the efficiency of smaller stores, which can be perceived as "cold" and lacking in personal touch.
3. Caught in the Middle: Losing its Cost-Effectiveness Advantage and Facing Increased Competition
IKEA's "Scandinavian design + affordable prices" used to be a strong selling point, but now it is under pressure from both domestic brands and e-commerce:
- Quality of Materials: IKEA often uses particle board, while domestic brands like Yuanshi Muyu offer more modern furniture made from solid wood (with natural wood or black walnut as highlights). Customers complain about the unclear environmental credentials of IKEA's materials and the poor quality of its hardware.
- Price Competition: Popular online shopping carts cost over 100 yuan at IKEA, while similar products are available for less than ten yuan on other platforms. Although IKEA has introduced 1,000 low-priced items, there is insufficient discounting on core categories like wardrobes and beds.
- Service Lag: 85% of customers prefer "free delivery and installation" (92% of Generation Z does), but IKEA still relies on customers to assemble their products themselves. This once-valued "ritual" has become an extra hassle for customers.
- Late Entry into E-commerce: IKEA only launched its own online store in 2018 and joined JD.com in 2025, with online sales accounting for only 25.7% of total sales (compared to 32.6% in China). Its instant retail delivery service is limited to a radius of 15 kilometers from stores, falling behind the industry's pace.
4. The Dilemma of Transformation: Balancing Efficiency and Experience
IKEA's transition to smaller stores and online sales is a rational move to reduce costs and increase efficiency. Smaller stores are closer to communities and have lower operating costs, while online sales can reach a wider audience. However, the question remains—why would customers make a special trip to IKEA? It's not just to buy a cup (which is cheaper online), but to experience the "lifestyle" offered by IKEA, including visiting showrooms, dining, and taking photos. These experiences require large spaces that smaller stores cannot provide, and online platforms cannot replicate.
If IKEA focuses solely on efficiency and loses its ability to create this "lifestyle experience," it may become just another home furniture supermarket, where customers only buy when they need something, without making a special trip.
Conclusion: Selling Large Stores is Easy, but Preserving the "Soul" is More Challenging
IKEA can convert idle assets into cash and shrink its large stores into smaller ones. However, the most important thing is not to lose the reason why customers were willing to visit in the first place. IKEA has been successful for 28 years by selling a vision of a beautiful home. Without that, what makes it different from other home furniture stores?
(The entire analysis is written in plain language, avoiding technical jargon, and each section includes specific examples and data to help non-finance professionals understand the logic and contradictions behind IKEA's transformation.)