IKEA taps Xiaomi for China expansion, digital transformation

November 29, 2018 13:14
IKEA wants to tap Xiaomi's massive user base in China to drive its growth. Photo: Reuters

Swedish furniture giant IKEA has teamed up with  Xiaomi Corp. to integrate its smart lighting products into the Chinese smartphone maker’s Internet of Things platform.

This is not the first time IKEA is partnering with a technology company to provide digital solutions for its products. Its smart lighting products are already compatible with Amazon Alexa, Apple's HomeKit and Google Assistant.

In the latest deal, the entire range of IKEA’s intelligent lighting products will be plugged into Xiaomi's IoT system as early as next month, securing support from Xiao Ai smart assistant and Mi Home App.

By doing so, IKEA will be able to tap Xiaomi's massive user base in China to drive its growth. Right now it is able to reach more customers for its smart home products in the United States, where around 40 million consumers use the smart speaker to order electric appliances, furniture and home furnishings. Beyond that, the company wants to tap the demand in China and other emerging markets.

Xiaomi has established probably the largest IoT platform in China. Globally, the company is connected to more than 132 million smart devices (excluding mobile phones and laptops), and has more than 20 million daily active devices in more than 200 countries and regions around the world, as of Sept. 30.

The Xiao Ai voice assistant alone has been activated in about 100 million devices, with monthly active users exceeding 34 million and cumulative wake-up times of more than 8 billion.

Björn Block has been the head of IKEA's smart home business for five years. He believes the deal with Xiaomi will improve user experience with IoT products by making them less complicated and more affordable.

IKEA is under pressure to transform its business amid consumers' changing shopping habits. The company is now in the process of creating "the IKEA of the future”. While it plans to cut 7,500 jobs in the next two years, it will add 11,500 jobs overall as it continues to expand.

In China, IKEA will shed 160 jobs but create 3,200 new positions as it adopts a new business model that is in line with its digital transformation.

IKEA China chief executive Anna Pawlak-Kuliga said the company would expand its e-commerce business using various platforms such as WeChat's mini program and flash sale stores to attract Chinese consumers.

IKEA currently has 25 stores in 20 cities across China plus two pickup points and three distribution centers. It has opened six new hyper stores in Xuzhou, Tianjin, Guangzhou, Zhengzhou, Changsha and Guiyang.

The company is in the process of revising its retail plans in China as the market is rapidly changing but it will retain a mix of formats including hyper stores, pickup points, experience centers, distribution centers and e-commerce platforms, Kuliga said.

For fiscal year 2019, IKEA will invest 16 billion yuan (US$2.3 billion) in China, the highest amount in the past 20 years.

The partnership with Xiaomi will certainly bring IKEA closer to Chinese customers, especially among the tech-savvy youth. This is important for the Swedish company: Chinese consumers are now making most of their purchases online and Xiaomi is one of most well-known brands in the country.

The deal will see IKEA's smart lighting products on the shelf of Xiaomi stores, which, together with its own online and offline outlets,  will further boost the Swedish company's exposure in the vast market.

Currently, Xiaomi operates more than 300 retail shops across China. And apart from smart lighting, other IKEA smart home appliances such as washing machines, dishwashers and refrigerators could also be a part of the Xiaomi's IoT network in the future.

The alliance with Xiaomi is a part of IKEA’s digital and business transformation.

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EJ Insight writer