Ikea to increase stores, improve assets in country

Global home furnishing giant Ikea will invest 6.3 billion yuan ($862 million) in China over the next three years to add physical stores and improve its existing logistics, digitalization and sustainability processes, in order to attract more consumers, its top executive said in Beijing on Wednesday.

Ikea, which entered the China market 25 years ago and has invested 43 billion yuan in the country so far, plans to open another store in Xi'an, Shaanxi province, doubling its stores in the city to two.

It also plans to open a mall in Shanghai in 2024 besides launching a distribution center in Tianjin to expand its footprint and diversify the functions of its offline stores.

In China, the Ingka Group, the largest Ikea retailer that represents of 90 percent of Ikea retail sales, runs 34 stores, two experience centers and eight Ingka Livat Shopping centers.

Part of Ikea's overall goal is to grow with its furnishing suppliers so as to serve its global market better, said Jesper Brodin, chief executive officer of Ingka Group.

Brodin, who is on a visit to Beijing, said Ikea believes in investing in China for the long term. "We believe the Chinese government is taking very strong measures to stimulate consumption, which will be very important to bring trust to consumers. Ikea has offered to be part of it and will support the journey.

"We in Ikea always believe the entrepreneurship in China is fantastic, and so is the speed of the digital development and sustainability. We truly believe that China will be at the forefront of becoming a sustainable society."

In the China market, Ikea has most of its capabilities and assets like retail, distribution, production, design, digital development and real estate, he said.

"All the things we have in China are partly to serve the development in China, and partly to help us become better globally," Brodin said.

On the shift in emphasis of the group's investment strategy in China, Brodin said: "In the years to come, you will still see some of the big centers, more touch points in the city, and more money going to solar and wind power.

"We will see more money go to digital development and maybe even investing in local companies to encourage entrepreneurs to be part of our multichannel network."

To better cope with mounting competition from domestic one-stop furnishing solution providers, Ikea has plans to explore its "New Retail" format, by opening the first batch of centers that offer planning and ordering services in Beijing and Shenzhen, Guangdong province.

These centers provide home furnishing solutions to people who are refurnishing or remodeling their homes.

Ikea will also invest in sustainable solutions to benefit consumers in China, helping them live in more energy-efficient smart homes, both in terms of costs and support for climate change solutions, Brodin said.

In China's home furnishing sector, where Ikea is ranked third behind two Chinese companies, the retail sales have seen fluctuations in recent years, declining in 2020 to 760 billion yuan from 806 billion yuan in 2019, and recovering a bit in 2021 to 784 billion yuan, only to drop again to 731 billion last year, according to Euromonitor International.

Over the years, the retailer has sought to open more smaller-sized stores as they are considered more convenient and accessible to local consumers. It has also put in place a digital team to develop its digital ecosystem for the local market.

Ikea launched its website and delivery services in 2018, as well as its stores on Tmall in 2020, Alibaba's business-to-consumer or B2C e-commerce platform.