In a year that brought several high-profile failures in the UK’s home and home improvement sectors, including the demise of Focus, Möben and Dolphin, Ikea was busy enjoying another record breaking year.

Ikea must ensure product quality is maintained as it ups overseas expansion

Ikea has reported group net profit rose 10.3% to E2.97bn (£2.48bn) in the year to August 2011, while revenue rose 6.9% to a E25.17bn (£21bn), with existing stores climbing 2.7%. The retailer declared it had been “relatively unaffected” by the economic difficulties facing shoppers, as its budget furniture and home accessories attracted more cost-conscious consumers in tough times. Indeed, visitor numbers rose 4.6% to 655 million worldwide.

Of the individual Ikea countries that have reported to date, the UK stands out as the only major market where sales dipped. Even in crisis ravaged Hungary sales rose 4.2%. Ikea vice-president Soren Hansen confirmed that sales grew in almost all countries, with the biggest gains seen in Russia, China and Poland. The group’s chief executive Mikael Ohlsson believes that the retailer’s commitment to price cutting paid off: “We have gained market share in more or less all markets. We have lowered prices to our customers by 2.6%, while the quality of our products has improved.”

Maintaining product quality as the group continues its seemingly relentless growth is likely to be one of the retailer’s greatest challenges ahead, however. Four major international product recalls in as many months suggests that not all is as well as Ohlsson suggests. Former chief executive Anders Dahlvig warned of the risks of the retailer’s growth when discussing his recent book Ikea Edge: “Size is a killer for every company.”

Price cutting and product quality issues are also likely to bring the group under increasing scrutiny from both the media and local authorities in the coming years. The group’s shift towards private-label ranges in the Swedish food store, while potentially benefiting the bottom line, also exposes the Ikea brand to risks associated with food safety. Protests from restauranteurs in Belgium over Christmas about its low food pricing policy also point to the kind of challenges that lie ahead for the retailer. If expansion into India eventually gets the go-ahead, the retailer will do well to avoid becoming the focal point of disgruntled local business owners, who have already done much to rein in the expansion of modern trade in the country.

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