Ikea to open 2 stores every 5 years in Indonesia
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Ika plans to build two stores every five years until 2025 after opening its first Indonesian store in Alam Sutera, Tangerang, in October 2014.
Ikea, the world’s biggest furniture seller, will produce more in Indonesia as it has set its sights on boosting its export value tenfold to US$1 billion in the long-run, a company executive says.
The Swedish multinational company, which had sales of ¤30.1 billion last year in its 361 stores worldwide, was looking to produce mattresses and flat-pack furniture in Indonesia next year, as well as textiles and batik-pattern products by 2017, said Tony Mampuk, Ikea Indonesia’s country government relation manager.
“The flat-pack furniture will depend on the results of our supplier gathering. If they are interested, it will be very easy to build flat-pack furniture,” he told The Jakarta Post in a visit on Tuesday. “Flat furniture includes particle board and ceramic products such as plates.”
President Joko “Jokowi” Widodo, intrigued by the fact that Indonesia’s furniture exports only amount to a third of Vietnam’s, has called on furniture exporters to meet a target of $5 billion in exports by 2019, more than double the $2 billion last year.
All Ikea’s soft toys worldwide are produced in Indonesia as Ikea Indonesia is “all about children”, Tony said.
“We have tried sourcing soft toys from other countries — China, Vietnam, Thailand — but we never found producers that are as good as here,” he added.
Ikea in 2014 exported 706 products from Indonesia, or almost 10 percent of the overall 8,500 product range sold worldwide, ranging from soft toys, rattan products and textiles, to ceramics and rugs. That represented a 20 percent growth from the same period in 2013, according to Tony.
“Flat furniture includes particle board and ceramic products such as plates.”
It has 11 suppliers spread across Java and will soon start teaming up with small and medium sized enterprises many involved with the Association of Indonesian Craft Development (Apikri) in Yogyakarta.
Ikea Indonesia, whose franchise is held by publicly listed retailer PT Hero Supermarket, plans to open two more stores every five years until 2025, Tony revealed, as it sought to cater to the nation’s rapidly emerging middle class with an increasing purchasing power.
Southeast Asia’s largest economy has grown between 4 to 6 percent per year over the past decade, helping to elevate nearly a third of its more than 250 million citizens into the middle-class or affluent consumer status. This is projected to further double by 2020, meaning that each year, between 8 and 9 million people will enter the middle-income bracket, according to a study by the Boston Consulting Group.
The rise in the country’s middle class has attracted a number of global retailers to invest in Indonesia, including South Korea’s conglomerate Lotte Group and Japan’s largest retailer AEON Co.
“Today in Southeast Asia, Indonesia holds the most charm for the retail sector,” said Tony, who is also head of the retail working group at the European Business Chambers of Commerce (Eurocham) in Indonesia.
About 1.75 million visitors have been to the 35,000-square meter Ikea Alam Sutera, Tangerang, store — some 25 kilometers from Jakarta’s city center — since it opened in October last year, some 8,000 visitors per day. Globally, Ikea store visits reached 821 million last year.
Ikea Indonesia is tapping into the middle-income consumer market in Greater Jakarta, which is home to a 28-million population and a $1.1 billion market in 2013, a figure that is projected to double to almost $2.2 billion by 2019, company statistics show.
“But all [our expansion plans] will depend on the regulatory environment and government support,” Tony emphasized.
He noted several hindrances to expansion in Indonesia, which include infrastructure bottlenecks — with shipping containers being stuck in port for up to three months, creating high logistics costs and uncertainties for the company’s finances — as well as multi-layered taxes that make some of its products more expensive here than elsewhere.
Questions & Answers
Q.What specifically will Ikea produce in Indonesia next year?
What specifically will Ikea produce in Indonesia next year?
Ikea plans to produce mattresses and flat-pack furniture in Indonesia next year. Also, textiles and batik-pattern products are expected to be produced by 2017. These plans depend on the success of their supplier gathering.
Q.How many products does Ikea currently export from Indonesia and what types of items are included?
How many products does Ikea currently export from Indonesia and what types of items are included?
Ikea exported 706 products from Indonesia in 2014, representing almost 10 percent of its global range. These products include soft toys, rattan items, textiles, ceramics, and rugs, showing a 20 percent growth from 2013.
Q.What challenges does Ikea face when expanding its operations in Indonesia?
What challenges does Ikea face when expanding its operations in Indonesia?
Ikea faces several hindrances to expansion in Indonesia. These include infrastructure bottlenecks, causing shipping delays and high logistics costs. Multi-layered taxes also make some of their products more expensive there than elsewhere.
Q.Which company holds the franchise for Ikea Indonesia?
Which company holds the franchise for Ikea Indonesia?
The franchise for Ikea Indonesia is held by PT Hero Supermarket. This is a publicly listed retailer in the country. Their expansion plans are designed to cater to Indonesia's rapidly growing middle class.