Why IKEA China’s Store Closures Signal a Deeper Shift in China’s Retail Landscape

IKEA China’s decision to close seven underperforming large-format stores from February 2026 should not be read simply as a retreat. It reflects a strategic recalibration that captures several profound shifts underway in China’s retail market.

At its core, IKEA is “closing big stores and opening small ones.” The traditional logic of scale—serving everyone with everything under one massive roof—is becoming increasingly difficult to sustain. Since China’s highly developed e-commerce ecosystem has already absorbed much of the standardized, price-driven demand that once supported large physical stores, offline retail can no longer compete head-on with online platforms on breadth or convenience alone. Its survival depends on differentiation.

IKEA’s pivot toward smaller, more targeted stores reflects this new reality. Rather than aiming for universal appeal, the company is moving toward serving precise consumer groups with clearly defined needs. Cities such as Beijing and Shenzhen—large, diverse, and consumption-driven—are ideal testing grounds. The Greater Bay Area offers an even clearer example of how demographic diversity enables retailers to shift from “general-purpose” offerings to precision targeting.

Crucially, IKEA’s core offline advantage has always been experience. That is something online channels cannot fully replicate. Smaller stores allow IKEA to sharpen this strength, reinforcing its identity as an experiential brand rather than a warehouse of products. But experience alone is not enough; product strategy must also change. This is why IKEA should and will concentrate on a narrower range of core bestsellers. Not all products need to move in volume—only those that truly resonate with the target group. This approach, which I call “boutique-scale standardization,” improves inventory turnover and lowers operating costs while preserving brand relevance.

This logic also explains IKEA China’s plan to invest RMB 160 million in developing over 150 lower-priced products, 70% of which focus on core bestsellers. These decisions are not made in isolation. They are increasingly driven by data and feedback gathered from smaller-format stores, enabling faster iteration and more cost-efficient operations.

Of course, the broader economic environment matters. A sluggish macroeconomy and a struggling property market inevitably weigh on furniture sales. Yet demand has not disappeared—it has fragmented. New-home purchases still generate rigid demand for furniture, while replacement and improvement needs remain widespread. Different life stages—new graduates furnishing their first apartments, families buying a child’s first study desk, or households upgrading for better livability—create distinct, addressable niches. And IKEA, and in fact all furnishing retailers, need to identify those niches.

China’s retail market is thus moving away from scale-based competition, which often leads to homogenization and intense internal rivalry. The future belongs to brands that can identify overlooked needs, emphasize safety and caring design—especially for middle-income consumers—and build deep loyalty within specific segments.

IKEA’s adjustment is not a sign of weakness. It is a signal that in today’s China, winning customers is no longer about being bigger, but about being more precise.