Ikea Set to Speed-Up Expansion In China

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Ikea was the first mass retailer to ban the use of plastic bags in the US and totally phased out the sale of incandescent light bulbs across its American retail outlets. (Photo: B. K. Tvedt)
Ikea was the first mass retailer to ban the use of plastic bags in the US and totally phased out the sale of incandescent light bulbs across its American retail outlets. (Photo: B. K. Tvedt)

BUSINESS

  • Ikea has nine stores in China, will now open three stores per year
  • Higher expansion pace than last few years forecasted going forward
  • Ikea focused on sustainability, with solar panel installations in California stores

Leading global furniture retail Ikea Group is set to open more stores in China to capture growth in the world's second-largest economy, with the goal to off-set dependence on the declining European market. Currently, Ikea depends on Europe for 80% of its sales, but expansion into China would permit the furniture company to reduce dependence on Europe, and cut prices by 1.5% by end 2011.

Sales for Ikea in China alone are growing at a faster rate than the entire company, Ohlsson added. Ikea currently has nine stores in China, and over the next few years, will begin expansion by opening three stores per year. The Swedish furniture giant will also continue to hire staff, after adding 4,000 new employees in 2010 alone.

Chief Executive Officer, Mikael Ohlsson told Bloomberg that “the demand is there,” with customers in China having “the dream, the wish, the need to furnish and the fit with Ikea is very good.”

“We will have a higher expansion pace going forward than what we have had in the last couple of years,” Ohlsson said. Launching a new store is no small feat, the CEO said, that opening an Ikea store costs roughly €60 million ($81 million) to €100 million ($135 million).

Sustainability a Priority

Expansion is not Ikea’s only priority this year; the company is also focused on sustainability, in homes and businesses. Ikea's US President Mike Ward was on a six-person sustainability panel at the Annual Climate Week event on September 19, where he outlined that Ikea already has 40 solar panel installations worldwide and is currently expanding efforts with renewables. “We are committed to a long term strategy in which Ikea stores and buildings will be supplied with 100% renewable energy. In addition, we want to improve our overall energy efficiency by 25% over 2005,” Ward said.

Ikea was the first mass retailer to ban the use of plastic bags in the US and totally phased out the sale of incandescent light bulbs across its American retail outlets.

The furniture retailer also partnered with American non-profit conservation organization, American Forests, to plant almost two million trees across the US, and introduced flat packaging, which allows for more items to be shipped in a single trip, reducing carbon emissions.

The most recent effort in sustainable business practices by Ikea, is the solar energy system installed in one of the company’s California stores. The 2,300-panel solar system will produce 760,300 kWh of clean electricity per year, which is equal to eradicating the emissions of 103 cars or powering 64 homes yearly.

Patrick Choa, the Californian store’s manager, told BrighterEnergy.org that: “Ikea has a never ending job where most things still remain to be done. We constantly ask ourselves how we can improve what we do today for a better tomorrow.”

Similar solar energy projects for Ikea already exist across the US, and other installations are in place for the company’s retail locations across the country.

Key Statistics – World Furniture Market (source: Koelnmesse)

  • Global furniture consumption hits over €276 billion, measured at producer prices.
  • Forecasted growth in the furniture industry is roughly 5% for 2011, however, the end of the current fiscal year will close at least at the break-even point, if not land in the black.
  • International trade volume of furniture for the current year is forecasted to reach over €74 billion.
  • Germany represents a key furniture market, within Europe, and saw sales volume of over €18 billion last year.

By Stephanie Lagopoulos for
Based in Toronto, Stephanie Lagopoulos is a freelance journalist covering lifestyle, travel and technology. She also works in the advertising industry.

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