The Business Times

IKEA targets French expansion, eyes central Paris

Published Tue, Oct 14, 2014 · 11:27 AM

[Paris] IKEA, the world's biggest furniture retailer, will invest 600 million euros (US$760 million) in France by 2017 to open seven new stores and renovate two of its existing outlets, the company said on Tuesday, creating 1,300 jobs and providing some cheer for a struggling economy.

The Swedish group, known for its low-priced but distinctive furniture and sprawling out-of-town stores, is also considering opening a shop in central Paris and setting up pick-up points for the collection of goods ordered online to respond to changing shopping habits. "We are starting to review the feasibility of opening a store inside Paris. The project is really at an early stage as we ponder logistics and store size," IKEA's chief executive for France, Stefan Vanoverbeke, told a news conference.

In June IKEA said it was opening a pilot store in the northern German port city of Hamburg in a central pedestrian shopping zone.

Shopping at out-of-town stores has been hurt worldwide by high fuel prices and a trend, first seen in the grocery industry, towards consumers making smaller, more frequent purchases closer to home due to tight household budgets.

IKEA's announcement comes as the French Socialist government struggles to tackle high unemployment and weak consumer spending in the face of feeble economic growth.

The French expansion plan is an acceleration from the 100 million euros IKEA is spending this year to open one store in Clermont-Ferrand in central France and renovate another store in Lomme in the North and the 500 million euros spent in the previous five years.

It is part of a longer-term ambition to lift the number of stores in France, the euro zone's second-largest economy, to 40 by 2020 from 30 now.

France, which accounts for around 10 per cent of group sales, is IKEA's third-largest market after Germany and the United States. IKEA employs 9,700 people in France and competes with retailers Conforama and But in a furniture market worth around 10 billion euros.

IKEA is the top furniture retailer in France, where its market share remained stable at 17.9 per cent in the year ended Aug 31 The group is targeting a market share of around 20 percent by 2020 thanks to its expansion plans and a policy of offering low prices to cost-conscious consumers while renewing at least 20 percent of its products each year.

Like-for-like sales were flat year-on-year at 2.39 billion in fiscal 2013/14, while store traffic rose 2 per cent in an economic climate Vanoverbeke described as "difficult".

The overall French furniture market fell 2.5 per cent during the first half 2014, hit by sluggish consumer morale amid rising unemployment and a slowdown in real estate transactions, Vanoverbeke said. REUTERS


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