A customer shops in an Ikea store in Beijing. The home-furnishing retail giant started construction of its second store in the city on Wednesday and aims to have at least 16 outlets on the Chinese mainland by 2015. [Photo / Bloomberg]

Construction commences on Swedish retail giant's second Beijing location

BEIJING - Swedish home-furnishing giant Ikea Group is on track to expand and upgrade its business across China, with plans to more than double its store numbers on the mainland by 2015.

"We are aiming to have 16 to 18 stores on the Chinese mainland by 2015 in a combination of first-tier and second-tier cities," said Gillian Drakeford, Ikea China's retail president.

After entering China in 1998, Ikea now has eight stores in eight cities across the country.

Ian Duffy, president of Ikea Asia-Pacific told China Daily that the company grew on average by 15 percent year-on-year in each of the past 12 years.

"Although the Chinese market amounts to a small share of our global business right now, we are confident that with our sped-up expansion and China's robustly growing economy, China will be the Ikea Group's biggest market in 15 to 25 years," Duffy said.

In the 2010 fiscal year, Ikea's revenue in China increased by 23 percent year-on-year to 3.7 billion yuan ($555.9 million).

Globally, the group's 315 stores in 38 countries produced 23.1 billion euros ($30.76 billion) in revenue during that period. China is not yet on Ikea's top 10 markets list.

On Wednesday, Ikea started the construction of its second store in Beijing in the city's southwestern Daxing district, together with a super-size shopping center, a co-investment of the Ikea Group and its sister company the Inter Ikea Centre Group.

The shopping center and store, with a total investment of more than 5 billion yuan, is the biggest investment worldwide in a single project for Ikea, Duffy said.

Related readings:  IKEA on expansion spree across nation  IKEA opens largest Asian store in Shenyang  IKEA to launch two shopping centers in China  Inter IKEA taps commercial property in China

By 2015, Ikea and Inter Ikea will open two more shopping centers, together with Ikea home-furnishing stores in Wuxi, Jiangsu province, and Wuhan, Hubei province.

"Shanghai is our next consideration, with similar investment scale," said Duffy.

Ikea started its home-furnishing business in Shanghai and Beijing in rented space. In 2003, it opened its first standard store in the Chinese market in Shanghai, and it stopped renting real estate in 2006.

"All of our stores now and in the future in China will be located on land we have purchased," Drakeford, Ikea's retail president, said.

Both Duffy and Drakeford attribute Ikea's success in China mostly to the company's strategy of providing affordable products to more people by continuously lowering prices.

"We are satisfied with what we have done in the past years, but, we will go further to lower our prices in the future, making our products accessible to as many people as possible here in China," said Duffy.

Ikea has established a business system in China that covers production, sourcing, logistics and retail. "That's the reason we can reduce the price of our products in China, for example, a coffee table from 199 yuan 10 years ago to 39 yuan today - the cheapest in the world," Duffy said.