The Swedish firm will invest 600 million dollars to begin its foray into the main markets of South America
The Swedish furniture company Ikea announced its formal entry into the Latin American market through the Chilean company Falabella, which has a strong presence in the region. It had been rumored for a long time about Ikea's interest in the Latin American market, starting with Mexico, but nothing had been materialized. Now, together with Falabella, Ikea has plans to open up to eight stores in the next ten years in Chile, Colombia, and Peru.
Leer en español: Conozca cómo llegará Ikea a Latinoamérica
Falabella has presence in a good part of Latin America, so the alliance with Ikea will give Europeans the tools to make their way in the region. The Swedish company is a furniture giant around the world, mainly in North America, Europe, and Asia. Its strength is the relatively low prices, achieved from an efficient supply chain and packaging, which delivers the unarmed products to the customer, which implies savings in transport, space, and assembly costs. As if that were not enough, the design has distinguished Ikea for its quality.
The differences of the European and Latin American markets are remarkable, the size of the middle class is different, so the purchasing power has been a factor for which Ikea delayed its entry into the region. Other difficulties that the markets present are the tariff and non-tariff barriers to furniture, as well as the economic instability of countries such as Brazil, Argentina, and Mexico. This last case is important, since there is a possibility that Andrés Manuel López Obrador will be the next president, causing uncertainty among businessmen and investors. Added to this, it is the harsh negotiation of the Free Trade Agreement with the United States and Canada, which made Ikea more cautious.
Not counting Mexico, Ikea has chosen the Pacific Alliance to open its first stores in South America, for its economic stability and sustained growth. In Falabella, Ikea found the ideal partner to open its new stores, due to its regional presence. Even with a future expansion to Mexico, Argentina, and Brazil, the same company is already present in these markets with different formats and with credit financing options through its own bank, something that Ikea values as a great asset.
As an experiment, Ikea opened a store in Puerto Rico and the Dominican Republic to study the behavior of the region's clients and their growth possibilities. Now, the Swedish company is committed to consumers in Chile, Colombia, and Peru, totaling 100 million, 35 of them located in the three major capital cities. Ikea will bet for Latin Americans to renew their furniture more frequently and for online purchases that would expand their selling capacity by not limiting themselves to the physical space for their development.
For now, Ikea has been clear about whether it will soon expand to other markets, since it was rumored that Brazil and Argentina would be contemplated; however, the company denied it, arguing that they would only focus on the three markets advertised. The first store is scheduled to open in Santiago in 2020 to continue with the opening of the other stores in the three territories.
Latin American Post | Luis Liborio
Translated from "Conozca cómo llegara Ikea a Latinoamérica"