€38bn Ikea looks to Asia for growth

Ikea is planning to enter South America and expand in Southeast Asia in its quest to dominate the world’s home furnishings market.

Those regions are on the Swedish company’s radar after entries into India and Latvia this year, Inter Ikea Holding said.

Retail sales including all franchisees and customer services amounted to €38.3bn in the most recent financial year, which ran through August. “South America will in the long-term become an important growth market,” Inter Ikea chief executive Torbjorn Loof said.

The company is seeking room to grow after focusing its most recent expansion mainly on China and Russia. Ikea has more than 400 stores in 49 markets across Europe, North America, the Middle East, Asia and Australia, including one in Dublin.

Chile, Colombia, Mexico and Peru are among the first countries Ikea may enter in Latin America, Mr Loof said, adding the only location it has currently in the region is in the Dominican Republic.

Brazil also has “great potential” but is complex and unlikely to be among the first, he said.

In Southeast Asia, Ikea plans to add Vietnam and the Philippines to its existing markets, which include Malaysia and Thailand, Mr Loof said.

According to Ikea’s plans, it will have opened its first store in South America within the next five years, which is the same timeframe it has set for its expansion into Vietnam and the Philippines.

As South America is a new region, it’s likely to enter two or three markets there around the same time in order to secure supply and production, he said.

“We haven’t zoomed in or decided on any particular markets, but we’ve said that within the next five years we should have opened our first Ikea in South America,” Mr Loof said.

“When we open in South America, because it’s a new continent and a new region, we can’t just open one warehouse.”

Ikea plans to add 22 new stores this year, up from 14 new stores in 2017. In the future, Ikea will probably open some 25 new stores annually, Mr Loof said.

Last year’s sales growth was lower than in previous years, Mr Loof said, adding that he expects growth to accelerate to as much as 8% to 9% in coming years.

Ikea’s website attracted 2.3bn visitors last year, while its stores got 936m visits.

Bloomberg

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