IKEA remains committed to China despite the economic slowdown

The IKEA logo is seen in front of an IKEA furniture store in Brussels, Belgium, June 13, 2023. REUTERS/Yves Herman acquires license rights

MALMO, Sweden, Oct 12 (Reuters) – China remains a key growth market for low-cost furniture retailer IKEA, even as the world’s second-largest economy shows signs of strain, executives at IKEA’s largest furniture owner said on Thursday.

China was for several years the fifth-largest market by sales for Ingka Group, which operates the most IKEA stores worldwide, but has now slipped to 10th place, accounting for 3.6% of the 2023 fiscal year ended Aug. 31 worldwide sales.

Ingka Group remains committed to China, CEO Jesper Brodin told Reuters, even as some Western companies seek to reduce their exposure to the country, whose recovery from the pandemic has been sluggish.

“There is no middle ground, you either have to believe and invest or not, and in our case we are committed to China and growth and development,” Brodin, who visited China last month, said in an interview.

The weight of China as a market for Ingka Group has decreased: in the 2022 financial year it accounted for 4.3% of global sales, while in 2018 it accounted for 6%, the same share as the UK. The company has 37 IKEA stores in China in a total of 537 locations worldwide.

In total, Ingka Group recorded 697 million visits to its IKEA stores in the 2023 financial year, 7.4% more than the previous year. The rate of increase was much higher in China, Brodin said, as stores reopened and shoppers returned.

Based on sales over the last few weeks, Ingka sees the potential for China to climb back into the top five markets.

“China’s sheer size makes it a huge opportunity,” said Tolga Oncu, head of IKEA retail at Ingka Group.

“From an IKEA perspective, given the size of the home furnishings industry in China and our existing market share, I’m not too worried about what’s happening in the macroeconomics,” Oncu said.

He ignored economic data showing weaker consumer demand and high youth unemployment in China.

“Usually IKEA outperforms the rest in these circumstances,” Oncu said.

China is also a key market for new retail technologies, Brodin said. As social media livestreaming as a shopping channel booms in China, Ingka is experimenting with live shopping there and plans to expand it to all of its markets.

“It’s interesting when we can reach people in new ways,” he said.

Reporting by Helen Reid; Editing by Josie Kao

Our standards: The Thomson Reuters Trust Principles.

Purchase license rightsopens new tab

London-based reporter covering the European retail sector from a global perspective. Helen focuses on companies such as Adidas, H&M, Ikea and Inditex, analyzing corporate strategies, consumer trends and regulatory changes. It also covers major supermarket groups such as Ahold Delhaize, Carrefour and Casino. She is particularly interested in sustainability and the way investors drive change in companies. She was previously based in Johannesburg, where she covered the mining industry. Contact: +447584155200