The company also started performing local quality inspections closer to manufacturing to save on repair costs.
Since 2000, IKEA has cut its prices by more than 60 per cent.
This was a massive change in strategy, as IKEA was targeting the mass market in other parts of the world. In most markets, the company uses its product catalogue as a major marketing tool.
In China, however, the catalogue provided opportunities for competitors to imitate the company's products.
This category of customers has relatively higher incomes, is better educated and is more aware of western styles.
Targeting this segment helped IKEA project itself as an aspirational western brand.
For instance, the price of its "Lack" table has dropped to 39 yuan (less than five euros at current exchange rates) from 120 yuan when IKEA first came to the Chinese market.
The company plans to reduce prices further, helped by mass production and trimming supply chain costs.
In 2004, for instance, its China revenue jumped 40 per cent from the year before.
But there was a problem - its local stores were not profitable.