'Ikea's Bold Move After 11 Years in Korea... Launching a Shopping Mall Strategy'

Gangdong Store to Open Next Month... First New Store in Five Years
Increasing Customer Touchpoints with 'Shop-in-Shop' Format in Downtown
Shrinking Amid Online Market Growth During COVID-19
Rebound Strategy Leveraging Both Online and Offline Channels

IKEA is set to open its first store in downtown Seoul since entering the Korean market in 2014. This move is part of the parent company Ingka Group's business format diversification strategy to overcome the prolonged slump following COVID-19 and secure momentum for a rebound.

According to the furniture industry on the 20th, IKEA Korea will open IKEA Gangdong at the complex shopping mall 'Gangdong I'Park The River' located in Gangdong-gu, Seoul, on the 17th of next month. This is the first new store in five years and will be operated in a shopping mall format rather than a large-scale store for the first time in Korea.

The reason IKEA Korea revised its large-store-centric strategy is analyzed to be due to poor performance over recent years. Operating profit, which was 29.4 billion KRW in the 2020 fiscal year (September 2019 to August 2020), continuously declined to 2.6 billion KRW in the 2023 fiscal year (September 2022 to August 2023), a decrease of about 90%. Amid this, IKEA withdrew plans to open large stores in Gyeryong, Chungnam in 2022 and Daegu in 2023, reconsidering its large-store expansion strategy.

At the early stage of its entry into Korea, IKEA introduced a DIY (Do It Yourself) furniture assembly method, positioning competitive pricing as a differentiator from competitors. Additionally, it operated experiential stores combining showrooms and restaurants to expand consumer touchpoints.

However, the situation changed after COVID-19. E-commerce platforms such as Coupang and Today’s House quickly delivered affordable furniture with installation services, reducing the attraction of IKEA products. Furthermore, two price hikes in 2022 somewhat damaged the brand image of being 'cost-effective and stylishly designed.'

To overcome this structured crisis, Ingka Group announced last year plans to invest 300 million euros (approximately 430 billion KRW) in IKEA Korea by 2026 and build more diverse sales platforms. Opening the Gangdong store next month is the first step in executing this plan.

An IKEA representative said, "Gangdong store is the first attempt to increase consumer accessibility within the city center," adding, "We will continue to explore various ways to expand contact points with customers."

IKEA Korea is also strengthening its omnichannel strategy linking online and offline. This includes allowing consumers to search for products and check information online, then experience and purchase them at offline stores, or easily order products seen offline through online channels.

To this end, an automated fulfillment system has been introduced in existing stores to efficiently handle online orders without building separate logistics centers. This system is currently implemented in part of the Giheung store and will gradually expand to stores such as Gwangmyeong.

Separately from these efforts, the industry is paying attention to whether IKEA will take more aggressive steps to restore price competitiveness. Although IKEA has not recently disclosed specific plans on this, there is speculation that it may adopt an aggressive marketing strategy, as it temporarily confirmed some improvement in sales and operating profit after reducing prices by more than 10% on about 800 items since the end of 2023.