Ikea takes flexible approach in Asia

11 June 2012

NEW DELHI: Ikea, the furniture retailer, is taking a flexible approach as it seeks to progress in the key markets of India and China.

The Swedish firm is currently tracking the evolving regulatory environment concerning "single-brand" retailers in India, which is undergoing a process of change.

While the government has lifted a limit restricting foreign companies to a 51% stake in any such venture, the updated rules require at least 30% of their products be sourced from local suppliers. These provisions are now rumoured to be under revision.

"Cautiously we are adding new markets," Mikael Ohlsson, its CEO, told Bloomberg. "We have big interest in opening in India. When the conditions are ripe in India we can start to prepare for an opening there."

"We are following very closely positive movement of legislation in India and try to understand the consequences."

At present, Ikea generates 80% of total sales, which reached $31.4bn globally over its last financial year, from Europe. Asia thus provides a large untapped opportunity.

Its strategy in China has been a careful one, with plans to open three stores per year in the rapidly-growing market going forward, up from one per year in the recent past.

The firm's Chinese sales are also expected to climb by 20% in 2012. It employs 5,500 staff in the country today, and believes headcounts will rise by about 1,200 every year for the foreseeable future.

Lowering prices has proved particularly important in this market, with Ikea having made its products around 50% cheaper during the last decade.

"Over the past years we have dramatically reduced our prices in China," said Ohlsson. "We will continue that this year and also next year to be more affordable for more people."

Ohlsson further suggested the company would seek to establish a presence in South Korea within the "next couple of years", yielding another avenue for growth.

Data sourced from Bloomberg; additional content by Warc staff