IKEA sticks with China despite slowing economy

China is still a key growth market for budget furniture retailer Ikea despite the world’s second-largest economy showing signs of strain, executives at the biggest Ikea store owner said on Thursday.

China was for several years the fifth biggest market by revenue for Ingka Group, which runs most Ikea stores globally, but it has now slipped to tenth position, accounting for 3.6% of global sales in its 2023 financial year, which ended August 31.

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

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

China’s weight as a market for Ingka Group has diminished: in the 2022 financial year it made up 4.3% of global sales, while as recently as 2018 it accounted for 6%, the same share as the UK. The company has 37 Ikea stores in China, out of a total of 537 locations worldwide.

Ingka Group overall saw 697 million visits to its Ikea stores in the 2023 financial year, up 7.4% from the previous year. The rate of increase was much higher in China, Brodin said, as stores reopened and shoppers returned.

Ingka sees potential for China to make it back into its top five markets, based on sales in recent weeks. China’s sheer size makes it a key opportunity, said Tolga Oncu, head of Ikea Retail at Ingka Group.

“Considering the size of the home furnishing industry in China and our existing market share, I am not, from the Ikea point of view, concerned so much about what’s happening in the macroeconomics,” Oncu said.

He shrugged off economic data showing weaker consumer demand and high youth unemployment in China. “Normally in these circumstances, Ikea outperforms the rest,” 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, he said Ingka is experimenting with live shopping there and plans to expand it to all its markets.

“This is interesting if we can reach people in a new way,” he said.