Ikea promises low prices in Thailand

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Ikea promises low prices in Thailand 
Bangkok Post: 23 Nov 2010
Ikea promises low prices in Thailand
Lower profit margin on most import items

Swedish build-it-yourself furniture chain Ikea vows to offer cheaper products to Thai consumers by cutting its profit margin.

It will open its first Bangkok store _ its largest store in Southeast Asia _ next November as part of the new Mega Bang Na shopping centre.

Ikea franchisee Ikano Retail Asia will uphold its parent company's principle of supplying functional home furnishings at affordable prices.

The company, as required by Ikea, will only be able to sell a tiny proportion of domestic products, which will account for just 2% of items. The rest will be imported, casting doubts on how it can maintain low prices in a market where extensive cheap furniture is available.

Lars Svensson, deputy store manager at Ikea Bang Na, said low prices could be achieved due to the company's bargaining power as it has over 300 stores worldwide.

"With more stores, we bring down prices because of economies of scale," he said. "With import tariffs, life is not easy for us, but we have to fulfil our commitment to consumers."

The company has conducted in-depth interviews with 500 Thai consumers and visited 50 homes to study the lifestyles of its potential customers.

Ikea has universal designs that can be sold worldwide. It had turnover of 23.8 billion (979 billion baht) for the fiscal year that ended in August.

Ikea believes its products are practical even if different markets have different tastes.

Ikea Bang Na, which will have about 7,500 articles, expects to welcome 4-5 million visitors a year. It will have floor space of 43,000 square metres including a 700-seat restaurant.

Ikano Retail Asia holds the licences for Ikea's business in Singapore, Malaysia and Thailand. It has two stores in Singapore and one in Malaysia. The company will add another store in Malaysia and look to tap the market in Vietnam and the Philippines.

Mr Svensson said there is a possibility of opening a second store in Bangkok about three years after the launch of the first one. In the next 10 years, it plans to have three stores covering the whole of Greater Bangkok. Each store requires investment of about 60 million.

http://www.bangkokpost.com/business/economics/207677/ikea-promises-low-prices-in-thailand