IKEA opens hub in Shanghai, plans new sites in China

Swedish home furnishings retailer IKEA has opened a regional distribution center in Shanghai to serve as a base for the company's expansion in China and elsewhere in Asia.

IKEA executives said the company also plans to open seven more stores in China in the next five years, including a new outlet in Beijing in April and a store in the western city of Chengdu by late next year.

Anders Dahlvig, president and CEO of IKEA, said late Thursday that the company also was planning to expand into Shenzhen in the south, Nanjing to west of Shanghai, and Dalian in the northeast.

Dahlvig would not say how much the expansion is expected to cost.

Low-cost image

IKEA hopes to generate a profit in China within the next few years, though so far it has striven to build up an image as a low-cost retailer, Dahlvig told Dow Jones Newswires.

"We have really invested everything into reducing our sales prices," he said. "Everything we gain is pushed back into lower prices."

The company projects its revenues in China will reach 1.5 billion yuan (US$185.7 million) for the financial year ending Oct. 31 next year.

Reforms opening up China's retail market to foreign companies last year paved the way for expansion by many world retailers, including IKEA, France's Carrefour and US discount giant Wal-Mart.

Buyout plans

IKEA earlier announced plans to buy out its joint venture partner in Beijing, close its store there and open a new, bigger outlet elsewhere in the city.

State media reported the retailer plans a similar change for its outlet in Shanghai, which is nearly always jam-packed with customers. It opened a third China store in the southern city of Guangzhou last month.

IKEA's new US$82 million distribution center in Shanghai will be built on a site in Shanghai's southwestern suburb of Songjiang. Construction is due to finish by 2007.

The company's main distribution center now, in Malaysia, has a capacity to handle only about half of the 60 containers the Shanghai center will handle each day when it is completed, IKEA said.

Although renowned for its Scandinavian designs, IKEA buys nearly a fifth of its products in China.

Asian expansion

The company is planning to open its first outlet in Japan in April, and now has its eye on India and South Korea, Dahlvig said.

"China and Japan are the two most important markets in Asia for us," he said. "Definitely India has a huge potential for us as soon as they open up to foreign investment in the retail sector."

IKEA, founded in Sweden in 1943, has 226 stores in 33 countries and regions.