The Indonesian Furniture and Craft Industry Association (HIMKI) said IKEA’s expansion would eat into the young consumer and families market, a lucrative segment for the country’s furniture sellers.

According to Statista, the domestic furniture and homeware market is expected to grow 11.51 percent annually over the next four years to US$6.98 billion by 2025.

IKEA, a Dutch home furnishing brand founded in Sweden, today sells around the globe through franchise agreements.

“The addition of IKEA outlets will severely hit Indonesian micro, small and medium [furniture] businesses,” HIMKI secretary-general Heru Prasetyo told The Jakarta Post on Wednesday.

Furthermore, he added, only 10 out of 195 HIMKI members supplied furniture to IKEA, which meant that the majority of members would not benefit from IKEA’s expansion.

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Hero Group opened a third IKEA outlet in March and announced plans last month to open five more across the archipelago, as the conglomerate diversifies from its loss-making grocery retail business. The group did not specify a time frame for the expansion.

The supermarket chain, which trades as HERO on the Indonesia Stock Exchange (IDX), saw its revenue drop 34 percent year-on-year (yoy) to Rp 1.7 trillion (US$118 million) in the first quarter of 2021 as mobility restrictions limited shopping hours and forced more shoppers to migrate to online platforms.

“We are also looking at new ways for our expansion, even floating the idea of smaller and more compact [IKEA] outlets,” Diky Rasbianto, the group’s head of corporate and consumer affairs, told the Post by email on Thursday.

Diky also said that the company maintained good relations and contractual compliance with local furniture suppliers.

According to market research firm Mordor Intelligence, IKEA is among Indonesia’s top five furniture companies, alongside Vivere Group and PT Integra Indocabinet.

HIMKI has identified IKEA as a key driver of furniture imports to the country and according to the latest available data on UN Comtrade, Indonesia’s furniture imports increased 15.3 percent to $268.96 million in 2019.

According to Heru, Indonesian furniture makers still dominate the domestic market with 70 percent of the market share, although he told the Post on Monday that the IKEA expansion could change the composition.

Heru added that HIMKI aimed to increase the industry’s export value to $5 million in the next four years.

Local furniture makers have been focusing on boosting sales abroad, with furniture exports growing 2.6 percent yoy to $1.13 billion in 2019, far exceeding imports that year. But Indonesia’s furniture industry lags behind several Southeast Asian peers in export value such as Vietnam, which exports around $11 million of furniture annually.

Indonesia’s furniture industry contributes 1.3 percent to its manufacturing sector, according to Statistics Indonesia (BPS).

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