Tag: ikea

China is still a key growth market for budget furniture retailer IKEA despite the world’s second-largest economy showing signs of strain, executives at the biggest IKEA store owner said on Thursday (Oct 12).

China was for several years the fifth biggest market by revenue for Ingka, which runs most IKEA stores globally, but it has now slipped to tenth position, accounting for 3.6 per cent of global sales in its 2023 financial year, which ended Aug. 31.

Ingka Group remains committed to China, CEO Jesper Brodin told Reuters, even as some Western companies are seeking to reduce their exposure to the country whose post-pandemic recovery has been sluggish.

“There is no middle way, you have to either believe and invest or you don’t, and in our case we are committed to China and the growth and development,” Brodin, who visited China last month, said in an interview.

China’s weight as a market for Ingka Group has diminished: in the 2022 financial year it made up 4.3 per cent of global sales, while as recently as 2018 it accounted for 6 per cent, the same share as the UK. The company has 37 IKEA stores in China, out of a total of 537 locations worldwide.

Ingka Group overall saw 697 million visits to its IKEA stores in the 2023 financial year, up 7.4 per cent from the previous year. The rate of increase was much higher in China, Brodin said, as stores reopened and shoppers returned.

Ingka sees potential for China to make it back into its top five markets, based on sales in recent weeks.

China’s sheer size makes it a key opportunity, said Tolga Oncu, head of IKEA Retail at Ingka Group.

“Considering the size of the home furnishing industry in China and our existing market share, I am not, from the IKEA point of view, concerned so much about what’s happening in the macroeconomics,” Oncu said.

He shrugged off economic data showing weaker consumer demand and high youth unemployment in China.

“Normally in these circumstances, IKEA outperforms the rest,” Oncu said.

China is also a key market for new retail technologies, Brodin said. As social media livestreaming as a shopping channel booms in China, he said Ingka is experimenting with live shopping there and plans to expand it to all its markets.

Ikea is planning to invest more than US$2.2 billion in an omnichannel expansion strategy in the US over the next three years.

According to Ikea, this is the company’s largest investment in the US in four decades, and it will focus on creating new stores and expanding fulfilment networks to serve more Americans.

Ikea will build new shops and extend its fulfilment network to give better delivery alternatives and provide a product range that matches the demands of everyday living in diverse regions across the country as part of the investment.

“The US is one of our most important markets, and we see endless opportunities to grow there and get closer to the many Americans with affordable products and services,” said Tolga Oncu, head of Ikea Retail at Ingka Group.

“More than ever before, we want to increase the density of our presence in the US, ramp up our fulfilment capacities and make our offer even more relevant to local customers’ needs and dreams.”

Ikea expects to open eight additional shops, nine Plan & Order points, and create more than 2000 jobs during this first phase of expansion. In addition, Ikea will build 900 new Pick-up locations where customers can pick up purchases made online.

Last year, Ikea US has added 15 customer Pick-up locations and two Plan & Order stations to make Ikea more accessible to customers. This summer, the company also announced new locations in San Francisco, CA and Arlington, VA.

“We are committed to continuing to grow in this market with our thousands of co-workers and millions of customers who look to Ikea for home furnishing inspiration and solutions at an affordable price,” added Javier Quinones, CEO & chief sustainability officer at Ikea US.

Ikea says this latest investment will forward that work by continuing to modernise existing locations to serve a dual purpose: offering inspiration and home furnishing knowledge while also expanding handling capacity for parcel deliveries directly from the store.

Neil Saunders, MD at consultancy GlobalData, said an investment of Ikea’s scale “should make other retailers sit up and take notice”.

“As the largest furniture retailer in the world, Ikea has economies of scale and volumes that allow it to offer value that few others can match. The expansion is a potential threat to Wayfair, At Home and other many mass-market players. While it will take time for Ikea to execute its plans, it is clear that a previously sleepy giant has woken up and is intent on making its mark.”

Saunders said that while the US is one of Ikea’s biggest international markets, the company’s reach there has always been relatively poor compared to its core European markets.

“Part of this is the result of Ikea’s traditional model of huge stores designed to pull in customers from an extremely large catchment. These work well in population-dense countries like the UK, but are less effective in the US where, outside of cities, people are more scattered and drive times can be extensive.”