Ikea to Triple the Pace of Store Openings in China

Ikea Group, the world’s largest furniture retailer, will triple the pace of store openings in China to capture faster growth in the second-largest economy, Chief Executive Officer Mikael Ohlsson said.


“The demand is there,” said the Swedish executive, sitting in a living-room display at the company’s Amsterdam store. Customers in the world’s most populous nation have “the dream, the wish, the need to furnish and the fit with Ikea is very good.” Sales in China are growing faster than at the company as a whole, Ohlsson said.


The expansion in China will allow the company to reduce its reliance on Europe, where it gets about 80 percent of sales and which is suffering from a slump in consumer confidence. Ikea will cut prices by 1.5 percent this year as its increased scale allows it to produce items at less cost, the CEO said.


“We will have a higher expansion pace going forward than what we have had in the last couple of years,” said Ohlsson, who has been at the helm of the company since 2009. The company will continue to accelerate hiring after adding about 4,000 jobs last year.


Ikea will open about three stores a year in China in the coming years, Ohlsson said, building on the nine it has there at the moment. Opening an outlet costs 60 million euros ($81 million) to 100 million euros on average, he added.


“What we always see is that the more value-conscious customers become, the more attractive Ikea is,” he said. “That is our idea, that the people with normal incomes in normal situations should get the most for their money.”


Ikea, which first comes up with a price point for a product and then figures out how to make it, is testing a program to work directly with contractors to market its kitchens, Ohlsson said. One in two kitchens in Norway are made by Ikea, while in some markets the number is one in 20, he said.


The retailer, known for a soup-to-nuts do-it-yourself approach, is also adding services for customers. For example, a shopper can select items they want in the store and have them delivered to their home without having to gather them from the outlet’s warehouses themselves.


“A lot of people want the absolute least expensive and that’s the whole idea — as a customer, you pay for the extra service and if you do everything yourself, you get the cheapest,” Ohlsson said.


Ikea, which has online shopping in some markets, is also developing its website to have a broader geographic reach and offer more services.


The company, which updates its collection of about 10,000 products with more than 2,000 new items a year, will continue investing in products and enlarging stores in the coming year as it shrugs aside the macroeconomic environment, the CEO said.


“It will continue to be a shaky world economy, with big differences between different regions and markets,” Ohlsson said. “Not least, in Europe, it will be quite shaky.”


 

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