Ikea Extends Recall in China Amid Criticism    

July 13, 2016  by in Business Strategy, Industry   

The move marks the latest sign of the growing power of the Chinese consumer, whose spending has fattened the bottom line of foreign and domestic companies alike but who has also shown a desire for safety and quality.

Two weeks ago, Ikea recalled 29 million pieces of furniture in the United States, where safety officials have blamed chests and dressers for the deaths of at least six toddlers in falling accidents. Ikea initially excluded China and Europe from the recall, saying that its products sold in those regions satisfied local regulations.

On Tuesday, after criticism online and in government-controlled Chinese media, Ikea switched course, saying it would recall 1.7 million chests and dressers in China.

“Ikea is a very responsible company,” Xian Jiaxin, a company spokeswoman, said in an interview. “Consumer safety is very important to us, which is how we came to this decision.” The recall still will not be extended to the European Union, she said.

Ikea — which in Chinese is called Yijia, or suitable home — has enjoyed a robust reputation among Chinese consumers. Compared with its other branches, Ikea stores in China routinely experience significantly more foot traffic from customers shopping for furniture, with some also coming simply to eat in the in-store restaurant and hang out.

Ikea’s China sales for the fiscal year ended in September totaled $1.55 billion, it said. Its products appeal to Chinese consumers willing to spend a bit more for quality. China’s 30 years of untrammeled growth have given rise to a vast, and increasingly discriminating, consumer market. With $4.5 trillion in annual retail sales, China is widely believed to be on track to surpass the United States as the world’s largest retail market.

Numerous food safety scandals in China, including melamine-tainted baby formula that killed six and sickened tens of thousands, have diminished consumer trust in domestically produced brands. As a result, Chinese leaders have enacted more stringent regulation and inspection of consumer products.

That scrutiny has also been placed on foreign brands. Every March 15, China celebrates Consumer Rights Day, during which China’s national television broadcaster hosts an annual program that accuses major companies of violating the interests of consumers. That has made companies especially sensitive to negative consumer perceptions in China. KFC and McDonald’s have battled skepticism in China about the freshness of their food after a major meat supplier closed two years ago because of safety concerns, and KFC scrambled last year to counter an online hoax that asserted the chain had bred eight-legged chickens to supply its restaurants in China.

“If you look across the world and you look essentially where there is still significant growth in consumer spending, the answer is very much China,” said Jeff Walters, a Managing Director of Boston Consulting Group’s consumer practice in China. “Of course, any company is going to make sure it’s standing on the right side of regulation to have access to a market that size.”

In Ikea’s case, the backlash in China was almost immediate. Angry consumers took to social media to complain about the company’s recall practices as well as to criticize inadequate domestic safety regulations. Chinese media cast doubts on the quality and safety of Ikea’s products, while an editorial published by Xinhua, the official news agency, denounced the recall exclusion as “blatant bullying.”

The Shenzhen Consumer Council, a government organization in the southern Chinese city of Shenzhen, released a statement criticizing the company’s decision. Government consumer associations in Nanjiing and  Tianiin followed suit.

Last Saturday, 11 days after the United States recall was announced, Ikea said it would begin discussing the possibility of a recall with the China Consumer Association, a government-established watchdog group, and Chinese government officials.

“We are only part of the consumer protection infrastructure, but we are an important link between consumers and businesses,” said Zhang Xu, the association’s spokesman, in Tianjin.