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Industry insider: IKEA exploits agent factories

(People's Daily Online)

13:38, September 25, 2012

The global furniture giant IKEA has been popular among consumers for its design and price advantages. However, consumers perhaps never know that low price does not mean lower profits. A supplier has recently revealed that the procurement price of an IKEA curtain is about 50 yuan but its profit margin reaches up to 80 percent. In this context, the absolutely low sale price may mean a lower procurement price while the product quality and consumers' interests will become the final victim.

IKEA has recalled the products in question for many times since 2011 and an industry insider told the reporter of New Express Daily of China that IKEA makes huge profits by compressing the interests of the suppliers, and it is strict with productive technology but relaxed on material quality. Another insider said that IKEA has rigorous supervision on production chain so it may be the improper design that led to defected products.

In spite of high profits, IKEA will not live up to its reputation of "a low price" if it can bring products with high cost performance for consumers. However, someone tipped off the New Express Daily of China that a steel frame bed is 140 yuan cheaper in Taobao than in IKEA stores.

The reporter searched "IKEA, agent manufacture" and "IKEA, direct selling" on Taobao and found several stores selling products from agent factories of IKEA. Two storeowners told the reporter that they also provide products to IKEA and their manufacturers are agent factories of IKEA.

Then, the reporter compared the commodities sold in the two stores with their counterparts in IKEA stores and found that the former is cheaper than the latter in price.

It may be acceptable for consumers that the IKEA products are a little higher than other products in price due to the additional value of the well-known brand, but frequent quality problems will reduce consumers' confidence in the brand. After investigation, the reporter found that IKEA had recalled defected products for five times from January 2011 to January 2012 and most of them are glass products and products for children.

Regarding product problems, IKEA told the reporter from the Xin Kuai Bao newspaper, “IKEA has about 10,000 products. We may have small problems in the production and design links, but once we find them, we always try to eliminate potential risks as soon as possible.”

According media reports, the number of IKEA's suppliers in China has reduced from 426 in 2002 to 350 currently and the remaining suppliers are also being urged to raise the production standard and reduce the cost. The narrow margin is forcing some of the suppliers to “look for other ways.”

Read the Chinese version:宜家被曝低价盘剥代工厂
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