Are the wheels falling off IKEA?
News that Kingfisher is to trial a small format store in Russia was well received, helped by the fact that an analyst visit to the country hosted by Kingfisher helped dispel any worries the City may have had about widespread corruption and bribery.
By Glynn Davis, City editor
The first point of interest here is that the visit was to St Petersburg which bears no relation to the rest of the country (including even Moscow). It is an extremely non-alien environment to Europeans, similar to other major capital cities in the EU but with a bit more water (excluding Amsterdam).
The second point, and far more interesting to Retail Bulletin readers as this is not a travel guide, is that in stark contrast to Kingfisher, IKEA only last month announced it was suspending any further investment in Russia. It cited the levels of corruption and bribes as the chief reason.
I’d certainly be very interested to hear the viewpoint on this issue from Peter Hogsted, the managing director of international at Kingfisher who was formerly head of IKEA in the UK.
Whatever the reality in Russia, it is notable how divergent the paths of these two global companies are. Kingfisher is now firmly on the front foot while IKEA (which was arguably a bit of a nemesis for Kingfisher at one point) seems to be on the ropes.
Not only has it made its problems in Russia public but it also pulled the plug on India after failing to convince the government to increase the ownership level that overseas businesses can have in single-brand retail operations.
IKEA has also been having a torrid time in the UK, US and Spain on the back of these countries’ especially weak housing markets. This catalogue of difficulties has led to 5,000 job cuts and more are on the cards around the world.
Having just constructed a bed for my daughter from IKEA without any problems I’d say the issues faced are more recession-related than a failure in the basic proposition, which suggests it is not headed for collapse. Hopefully that’s IKEA and the bed.
