Ikea exercises caution as furniture market toughens

Dahlvig, who will step down from the world’s largest furniture retailer in September after 10 years, believes furniture retailing has changed for good in the face of the recession.

“Furniture retailing is under pressure in the Western world,” said Dahlvig, who believes the proportion of disposable income being spent on home furnishings is dwindling indefinitely.

“Consumers are spending their money on electronics; on things such as broadband, and on basic consumption too. Over time these things will take up a bigger part of people’s disposable income, and furniture is losing ground on this. This is a concern and our biggest challenge,” he said.

Dahlvig said Ikea still has overseas plans, but they have been reined in. It operates in 39 countries and last year revealed it was scaling back from 20 to 25 store openings a year, to 10 to 15.

He said: “We felt we needed to catch our breath, but this is a five-year perspective. I assume this number will be stepped up.”

He highlighted the UK as a particularly weak market at the moment, but said Spain and Sweden are suffering too, while the US has “levelled out a bit”.

He said Ikea’s performance in international markets has so far been a “mixed bag”. He added: “We’ve learned to be successful in countries like China and Russia but it has taken us a number of years. We naively tried to apply the same business model as we did in Europe. But we have since made adaptations and now have a model for developing countries.”

Ikea, which this month was voted the world’s most trusted retail brand in a study by international consortium of retail consultants the Ebeltoft Group, opens its first Irish store in Dublin on July 27. Dahlvig said: “It will be tough, and very interesting to see how Ikea works in one of the worst recessions Ireland has seen. But we will do well over there.”

Between 2010 and 2011, Ikea will debut in Slovenia, Croatia and Serbia, where it will no doubt influence furniture retailing as it has done elsewhere.

“A lot of companies have copied us on flat-pack furniture, even the high-end ones,” Dahlvig noted. “But in some ways I’m surprised there has been so little conceptual competition. Although that’s probably wise, as it’s very difficult to compete with us.”