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Ikea goes ahead with $1.4 billion China investment despite slowing growth

  • Wendy Hu

    Bloomberg

Beijing, China   /   Fri, August 23, 2019   /   02:20 pm
Ikea goes ahead with $1.4 billion China investment despite slowing growth The logo of IKEA is pictured at the Europe's biggest Ikea store in Kungens Kurva, south-west of Stockholm on March 30, 2016. Ikea founder Ingvar Kamprad, who built a global business empire with revolutionary flat-pack furniture and dallied with Nazism in his youth, turned 90 today. (Agence France -Presse/Jonathan Nackstrand)

Home furnishing giant Ikea has seen sales growth soften for three consecutive years in China as the country grapples with a slowing economy and waning consumer confidence caused by a grinding trade conflict with the US.

Still, the Swedish retailer is pressing ahead with 10 billion yuan ($1.4 billion) of investment in the next 12 months and opening four more stores in the country by August 2020, said China President Anna Pawlak-Kuliga at a media briefing in Beijing.

“We have strong confidence in the China market,” she said. “It’s one of the most dynamic markets with the most potential.”

Global retailers, long used to counting on the rising Chinese middle class for explosive growth, are dealing with unprecedented uncertainty in the world’s second-largest economy. The next round of a tit-for-tat trade war with the US will likely drag economic growth below 6 percent, while a weakening yuan has weighed down consumer sentiment. But global brands from Starbucks to Ferrero Rocher are continuing to expand in China, banking on the long-term potential of the world’s biggest pool of consumers.

Ikea, whose global sales touched 38.8 billion euros ($43 billion) last year, sees Chinese consumers aspiring to premium consumer goods including home furnishings, said Pawlak-Kuliga. Ikea will adjust its business operations in China to suit the local context, such as launching sales on local e-commerce platforms and piloting a program on Wechat for consumers to order its beloved meatballs.

It’s also bringing a new concept of mini-Ikea stores to Shanghai next year. These “planning studios,” meant to cater to urbanites who don’t want to travel outside the city center to go to Ikea’s larger stores, have already been launched in London and New York City.

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