IKEA to open in New Zealand

FILE PHOTO: A customer shops at an IKEA store in Madrid, Spain, October 10, 2018. REUTERS/Susana Vera

(Reuters) - IKEA Group, the world’s biggest furniture retailer, said on Thursday it is expanding into New Zealand - even as it faces stiff competition worldwide from online outlets and traditional department stores that are branching out into home furnishing.

IKEA said it was providing customers in New Zealand with both stores and e-commerce options to purchase items, adding that more information about operations in the country would be provided early next year.

“Inter IKEA Systems B.V. is today announcing its intentions to grant the Ingka Group exclusive rights to explore expansion opportunities in New Zealand,” it said in a statement.

The IKEA stores worldwide are owned by 11 franchisees, of which IKEA Group, whose formal name is Ingka Group, is the biggest with 367 stores at the end of August this year.

Inter IKEA Systems is the worldwide IKEA franchiser and owner of the IKEA Concept.

IKEA is known for its vast self-service out-of-town stores but is transforming its business model in the face of mounting competition, increasing urbanisation, and more demanding consumers who would rather order furniture online to their door then trekking to the city limits.

The company’s large-scale investments in improving its online offering, delivery services and in opening new smaller city centre stores led to a drop in FY 2017/18 operating profit to 2.25 billion euros (2.03 billion pounds), despite nearly 5 percent growth in retail sales.

IKEA last month said that investments in the current fiscal year would be even higher, and then flatten out in the following year.

Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Alison Williams