Ikea to boost local manufacturing

Shopping at Ikea could sometimes be a source of frustration when told the furniture you had just bought and expected to pile in the back of the car was “out of stock”.

So it’s good news that the Swedish furniture and homewares retailer is planning to spend more than $1 billion on a warehouse and new stores.

And even better news for Australian suppliers: Ikea Australia is talking to local manufacturers about sourcing sofas and mattresses for the first time.

Ikea’s Kent Nordin told The Australian Financial Review that Ikea hasn’t had the volume necessary to get good deals from suppliers until now.

The warehouse will be set up in Sydney by 2010 and seven stores added to the east coast over the next decade. In the past five years Ikea has closed down five stores and instead chosen to set up a super store in Brisbane, Melbourne and Sydney.

Ikea, which was established locally in 1975, posted its first profit in 2003, after focusing on volume retail. Nordin says Ikea needs to sell a large volume of each product to make money and with smaller stores in Australia just could not get the volume to be profitable – hence the new super store strategy.