IKEA Will Finally Open in Thailand

By Tobias Jagd

 

After three years of searching, and many more of planning, the Singapore based company Ikano has finally found the right spot for the first Thai IKEA. It is supposed to open in the, yet to be build, Mega Bangna on the Bangna-trat ring road in November 2011. The Mega Bangna is a new megamall, which will be built for the occasion. Thai-Sweden review, is told by Tom Huzell, Managing Director of Ikano Singapore.
The 40,000 m2 IKEA will be operated by Ikano Thailand ltd. a company owned by Ikano Singapore, which is fully owned by Ikano Luxembourg – the last owned solely by the IKEA founding family. So contrary to most stores in the IKEA chain, which are run on a franchise basis, the first Thai IKEA will have ties directly back to the Kamprad family.

Read also:    IKEA Opens in Bangkok 3rd November

 

Ikano Singapore has been planning a Bangkok opening and searched for locations several times before, but didn’t get the green light from the mother company before recently. The reason is, that more than 90% of all IKEA stores are operated on a franchise basis, and it’s only logistically possible to open around 30 – 35 stores a year – worldwide. Because of building time, management training, securing supply lines and so on. And last but not least, the stores planned to open are – of course, chosen with focus on what the chain considers to be the best, most profitable business locations.
Therefore IKEA Bangkok has been waiting in line with all the other prospects. But finally the time has come for Bangkok to become yet another city on the IKEA world map that stretches over 35 countries.
Another reason for the relatively late IKEA arrival in Thailand, and why Ikano Singapore has not been more aggressive, about opening in Bangkok, is the country’s unusual high import duties, making the profit margin very pressed, as Tom Huzell explains
“Even though we think, that Bangkok, as a market, has been mature for a long time – we don’t expect it to be a goldmine, because of the tax issues. But if you want to be a player in global business, you have to be represented in all major cities, and hopefully the tax system will change in the future?”

 

Joint venture
Because of the many obstacles in the Thai foreign business act like: No foreign companies are allowed to operate retail business, service businesses (restaurant in the store) etc., but most important – foreign companies are not allowed to own land in Thailand, Ikano decided to form a joint venture regarding the Mega Bangna project, where the IKEA store will be located,Tom Huzell reveals.
The main partner in that company became the well known SF group (Siam Future development) Thailand’s third biggest mall owner. Both companies own a 49% share of the Mega Bangna and the last 2% are owned by IKEAs local supplier SB furniture, a company that has produced IKEA products for more than 20 years.
“We could have set up some kind of solution on our own, but IKEA is a very famous and respected brand, so we want to keep our hands clean and not get involved in any kind of shady deals – like so many other companies, wanting to operate on their own in Thailand, end up doing”

 

Mega project
Mega Bangna’s building cost will be around 15 billion Thb., with roughly 11 billion spent on the shopping mall and 4 billion on the IKEA store. The mall will be 250.000 m2 with the IKEA occupying the 40.000 m2 the rest will be leased out to approximately 500 shops. Tom Huzell believes the 8000 parking spaces will be filled by cars coming from a radius of 50 kilometers.
With the planned size of 40.000 m2 Bangkok’s first IKEA will become a very big store within the chain, and be one of the 10% biggest IKEAs worldwide. Ikano expects around 5 million visitors a year – in the IKEA alone, bringing the Bangkok store in the world’s top 20 of the chains most visited.
Tom Huzell expects that the construction of Mega Bangna will create 20.000 jobs in the construction phase alone, not counting the many extra people employed with manufacturing materials for the building site. The IKEA store is expected to employ around 450 people and the mall around 6000.
So as Tom Huzell dryly points out
“It’s not a small project!”
He believes that the first IKEA store in Bangkok will also benefit Thai manufacturers in the long run. Because many will suddenly be able to visit an IKEA for the first time and see the products offered. That normally leads to local manufacturers seeing opportunities in offering existing products, at a better price, generating more manufacturing business in Thailand for IKEA worldwide.
Ikano Singapore plans to build in all three IKEA stores in Bangkok over the next 10 – 12 years. The company already operates two stores in Singapore and one in Malaysia. The next step to expand the SE Asian adventure further will be opening stores in Indonesia, Vietnam and the Philippines.

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