The Swedish retailer Ikea starts to expand its business in China despite the country’s economy slowdown due to trade dispute. To begin its move, Ikea builds its very first store in China’s southwestern province, Yunnan.
The location of the three-story building worth US$ 141 million is at Yunnan’s capital, Kunming. Upon the completion, Ikea will be operating 35 stores throughout Mainland China.
Regarding the expansion, Ikea China area director, Lukasz Ostrowski, has full confidence in the future development of the business in the country. The same confidence is expressed by China President Anna Pawlak-Kuliga.
“We have strong confidence in the China market. It’s one of the most dynamic markets with the most potential,” said Pawlak-Kuliga.
Besides the construction, the Swedish company also put US$ 1.4 billion of investment in the next 12 months recently. Also, by August 2020, the company will have opened four more stores in the country.
In addition, the company will make adjustment to the country’s local context as well in the future. For instance, Ikea will launch sales on local e-commerce platforms and enable consumers to order Ikea’s meatballs through WeChat.
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Ikea’s Business in Mainland China
Although Ikea has spectated two decades of rapid and accelerating expansion in China, its sales growth has softened for three consecutive years. Accordingly, the softening sales growth is due to the escalating trade dispute with the US.
Actually, Ikea is not the only retailer who experience softening sales growth in the country. Several global retailers in the country are also facing uncertainty in the market due to economic growth below 6% and weakening yuan.
Considering the situation, Ikea still sees opportunities in its business expansion in the country. The company believes that Chinese consumers have a strong aspiration to purchase premium goods, including home furnishings.
Furthermore, Chinese people appear to have a good impression on Ikea. For example, Chinese customers love to chill and take a nap at Ikea stores to escape the summer heat. Ikea thinks it is acceptable for they see it as a way to not turn away potential buyers.
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