Ikea flags in Delft, the Netherlands. Picture: REUTERS/YVES HERMAN
Ikea flags in Delft, the Netherlands. Picture: REUTERS/YVES HERMAN

Ikea plans to expand to about a dozen new markets in the coming years, including branching into South America, as the Swedish furniture giant aims to reach 3-billion potential customers by 2025.

The company will open stores in Chile, Colombia and Peru through a new Ikea franchisee, Falabella, as part of its first foray into South America, Inter Ikea said on Wednesday.

Inter Ikea, which owns the Ikea concept and is the worldwide franchisor, said it plans to start selling its products in Mexico, Estonia, Ukraine, Puerto Rico, Oman, Luxembourg, the Philippines and Macau.

We’re very excited to open in South America. It will be a faster and bigger expansion than when we’ve entered new markets before.
CEO Torbjorn Loof

"By 2025, we have the potential to reach and interact with 3-billion people," Inter Ikea CEO Torbjorn Loof said. "We will offer new and different ways to shop the Ikea product range — online, in remote locations and in city centres. We will introduce smaller store formats and offer a wide range of flexible and affordable services."

Ikea is shifting resources towards emerging markets and alternative shopping experiences such as e-commerce and city centre stores to better cater to customers’ changing needs. The new expansion plans were laid out as Inter Ikea reported a 4.5% increase in retail sales in the 12 months to end-August, adjusted for currency effects, at the franchisees that operate more than 400 stores globally.

Total retail sales, which include sales of products and services, rose to €38.8bn from €38.3bn a year earlier. In its last fiscal year, India and Latvia became new Ikea markets as the company opened 19 new stores around the world. In its 2019 fiscal year, which runs to end-August, 15 retail locations are planned. That includes a new store that was opened in Bahrain in September.

The company now has online stores in 35 markets after its operations in Belgium, Romania and Malaysia had introduced
e-commerce. The company is also exploring sales of its products on external online marketplaces and Loof said he hopes to introduce a collaboration with a digital shopping platform in the next year.

Ikea will open nine stores and expand online in Chile, Colombia and Peru, through the Falabella franchise, in the coming decade.

"We’re very excited to open in South America," Loof said. "It will be a faster and bigger expansion than when we’ve entered new markets before."

The retailer will need at least
1-million cubic metres of goods in South America to break even, Loof said. Its first store is planned to open in Santiago in Chile in late 2020 and locations in Lima in Peru and Bogota in Columbia are then likely to follow, he said.

Ikea’s transformation means franchisees such as Falabella have a menu of options to choose from to jumpstart their expansion, including physical store formats and digital services. That means new Ikea franchisees should be able to "reach bigger volume faster with lower costs", Loof said.

The largest Ikea franchisee, Ingka Group, said its full-year sales rose to €34.8bn from €34.1bn a year earlier. That is about 90% of Ikea’s total retail sales. Ingka said sales grew in most of its 30 markets, with one of the biggest increases being recorded in China.

After acquiring assembly service TaskRabbit in 2017, Ingka said it is expanding that service to Canada in 2018 after integrating it fully in the US and the UK.

Bloomberg