IKEA positive on the negatives in the current economy

Speaking at the World Retail Congress in Barcelona Anders Dahlvig, president and chief executive officer of IKEA Group, stated: “We see growth at a slower rate, or going down, in the US, UK and Germany so it is affecting us quite a lot. But my message in a downturn is that we see opportunities not to be missed.”

These include initiating efficiency measures including a greater focus on cost reduction, a continued decrease in costs to consumers despite the increasing price of raw materials, and an acceleration of store openings especially in emerging markets.

“The growth in these countries gives us an opportunity. We'll focus capital expenditure in new countries like Croatia, Slovakia and Ukraine as well as in China and Russia . And hopefully India if legislation changes,” says Dahlvig.

However, he does not expect entry into India just yet as the demands by the government for external businesses to tie-up with local operators means IKEA would only be able to own at most 51 per cent of any Indian venture.

India is not the only place where IKEA has an issue with legislation as it continues to rail against the property rules in some developed countries including the UK. “Regardless of the economic climate this anti-competitive climate is a problem for all big-box retailers. Our expansion in the UK has therefore been much slower than if there had been no legislation. This is a European phenomenon that we've not experienced in the US and it is a concern,” explains Dahlvig.

Another issue with the developed markets (of Europe and the US) for IKEA, according to Dahlvig, is that not only is there a decrease in consumers' purchasing power as a result of an increase in housing and energy costs but there is also a shift away from the buying of furniture to things like holidays and electronics products.

“This puts a pressure on us so we'll continue to reduce prices, which will be a strategic element of our business. This is one attribute that we need to do even if it means lower margins and lower profits,” he says.