SHANGHAI -- Ikea is strengthening its Chinese operations by investing 10 billion yuan ($1.4 billion) in fiscal 2020, starting from Sept. 1, to meet changing demands in home furnishing.
The investment, the Swedish furniture maker's largest in China, is part of a three-year strategy to enhance access to its products, boost its online presence and improve its home expertise services. This will involve store upgrades and the opening of small retail outlets closer to customers, as the Chinese market becomes increasingly urbanized and online shopping increasingly prevalent.
"China's home furnishing market is currently in a period of steady growth," said Anna Pawlak-Kuliga, head of Ikea China, on Thursday. "At the same time, urbanization continues to accelerate alongside digitization and the rise in per capita disposable income."
To capture this shift, Ikea aims to open four new stores over the next four months, as well as upgrading existing stores to integrate online and offline services that will give it wider e-commerce coverage. Unlike its existing 27 warehouse-sized stores across the country, Ikea has set out to operate smaller retail outlets to capture a wider pool of customers, with the first in Shanghai slated to open by the end of January.
Other new business initiatives include the launch of comprehensive home-design services, beginning with bedrooms and kitchens, and closer collaboration with real estate developers on furnished apartments and offices.
The expansion comes with a plan to recruit an additional 3,000 staff and a promise of further investment in the next two years as competition becomes more fierce with other e-commerce players entering the home furnishing market.
In May, Alibaba Group Holding invested 4.4 billion yuan in Red Star Macalline Group, the country's largest furniture maker with 364 stores. They will collaborate in a home furnishing business as well as in retail mall operations.
Ikea opened its first store in Shanghai in 1998.