IKEA grows despite slowdown

IKEA plans to open two more stores, one in Shenyang and another in Shanghai over the next one to two years. Asianewsphoto

A spokesperson for IKEA in China said the Swedish home furnishings multinational had, like B&Q, been impacted by the economic downturn.

Linda Xu, public relations manager for the company, admitted times were difficult for the home improvement market.

"We can also see the negative impact to IKEA's business from the global financial turbulence. We see the customer is more cautious about spending money. We, however, have more visitors to our stores but less spending on average," she said.

IKEA opened its first store on the mainland in Shanghai in 1998 and now has seven on the mainland. The last was opened in Dalian in Liaoning province in February this year.

Xu said that despite the economic downturn, IKEA plans to open two more stores, one in Shenyang and another in Shanghai over the next one to two years and that there are others in the pipeline.

"We plan to open more stores in more cities in China," she said.

IKEA was started by entrepreneur Ingvar Kamprad in 1943 when he was just 17 in the small village of Agunnaryd in Sweden.

It opened it first store outside of Sweden in Norway in 1963 and now operates in 36 countries around the world. Last year it had sales of 191 billion yuan (21.2 billion euros), employing some 127,800 people.

Asia (including Australia) still remains a small part of its business, accounting for just 3 percent of its sales compared to the 15 percent it generates from North America and a massive 82 percent from Europe.

Xu said that IKEA is in a more specialist segment of the market than B&Q, focusing only on home furnishings and not on building supplies.

"IKEA focuses on the home furnishing business. We aim to be the leading retailer in the home furnishing industry. What we do is offer total solutions on home furnishing through providing good design and both functional and low price products that many people can afford to buy," she said.

Xu added that the expansion of new properties in China had little impact on IKEA since the purchasers of these properties still tended to specify the kitchens and bathrooms they required, some of which would be sourced from IKEA.

"It is not the case that only the purchasers of second-hand property buy these items. We know that many people who buy new property tend to buy the kitchens and bathrooms themselves," she said.

The spokesperson added it was difficult to define which companies are IKEA's direct competitors because of the individual nature of the company's offer.

"IKEA's very unique business model, makes it really hard to say who is our competitor, " she said.

She said IKEA has a firm idea of its brand and does not change what it offers the consumer in different countries.

She added that, as a result, IKEA has to be prepared to wait for local consumers to become familiar with the IKEA concept and what it has to offer them.

"It takes time to make the market really understand the IKEA concept. We feel that from the showroom in China, the customer can recognize 'their home' in an IKEA store and that is the adaptation we did for the Chinese customer. It was getting the consumers to see IKEA products in the Chinese home," she said.

(China Daily 04/06/2009 page9)