Swedish furniture giant IKEA is going to try and enter the Ukrainian market for a third time. The company was interested in opening its iconic yellow and blue stores in Ukraine – the same colours as the Ukrainian flag – in 2005 and 2010, but plans unravelled because of the endemic corruption scared the retailer off.
“It’s no secret that for IKEA, which is currently planning to enter the Ukrainian market, one of the biggest issues is the situation with corruption,” Martin Hagström, Swedish ambassador to Ukraine, said in an interview in February. “I think that the fact that IKEA has decided to come to Ukraine is a sign that the company sees the changes [in the country] and is confident that it will be able to work here based on its principles.”
This statement followed an announcement in December by the Swedish furniture retailer that it intended to enter the Ukrainian market. According to IKEA, the decision to enter a new country is made by the company on the basis of “thorough market studies in which franchisees are carefully evaluated”.
IKEA South East Europe (SEE) will run the operations in Ukraine. IKEA SEE also handles the IKEA retail operations in Croatia, Serbia, Romania and Slovenia. They are currently in the process of identifying a suitable business model that would allow the large number of potential customers to shop in IKEA in Kyiv within one or two years, according to the company’s media office.
“After the initial market studies are conducted, they will be able to share more details of the future investment in Ukraine,” added the furniture giant, which currently operates 411 stores in 49 markets, as well as 11 groups of franchisees.
The store is a hallmark of economic development and by this yardstick Ukraine is well behind the rest of the region. When IKEA opened its first store in Russia in 2000 that marked the beginning of a decade long consumer driven boom and the chain has since spread across the country, which has become one of its most important markets. An IKEA store would be a coming of age for Ukraine’s retail sector.
However, this attempt to enter Ukraine’s market, which has a population of almost 40mn, is not the first one for IKEA.
The company first announced its plans to enter Ukraine in 2005. They planned to construct a commercial and entertainment centre in the vicinity of Kyiv, but were unable to reach an agreement with the authorities on the allocation of a plot of land near the Kyiv-Boryspil highway.
Later, IKEA acquired a 64-hectare plot of land in Odessa region for the construction of one of its stores, but this project also failed to materialise. In 2010, the company turned its back on its previous plans to enter the Ukrainian market. At the same time, the Swedish furniture giant sold off the assets that it owned in Ukraine – two wood processing plants and a furniture factory.
Today, IKEA appears to be approaching Ukraine with more caution. Specifically, the Swedish retail giant is trying to secure the support of the government in Kyiv with the aim of smoothening its entrance onto the market.