IKEA, the Swedish-based furniture retailer, has delayed the launch of its second unit in Romania, initially scheduled to open in October, until 2009 amid extensive talks related to the acquisition of land.
"Unfortunately, (talks for land acquisition) have not been finalised, because currently the Romanian real estate market is in disarray. In order to open a new store an accessible, visible and sizeable area is required. These three criteria are difficult to find. There is also the danger that market speculations make certain areas very attractive, at which moment when conditions become unfavourable," Cornel Oprisan, IKEA retail manager, told ZF.
He explains the second IKEA store will be located near a city with over 300,000 inhabitants, such as Cluj, Constanta, Iasi, Timisoara, or Brasov, and will be similar in terms of size to the Bucharest store. Romania's first IKEA store covers 26,000 square metres and was opened in March 21, 2007 in the wake of overall investments worth 25m euros.
"We will probably start with 7,500 items that will be displayed throughout a 24,000-sqm retail area. The store should be large enough to allow us to display the entire product range," explained Oprisan.
IKEA could end the first year on the Romanian market with turnover worth 90m euros (VAT included), more than double the initial estimate of 40m euros. The company has gained a foothold among the biggest players on the furniture market, put at 1.1bn euros last year. The major players include Mobexpert, with 168m-euro sales in 2007 with 35 stores, and Elvila, 106m-euro sales in 2006.
In its first nine months on the domestic market, IKEA generated sales worth 70m-euros, and sold over 8.2 million items of furniture, home d?cor and accessories.
IKEA has 503 domestic staff, with a significant share being students who are employed part-time. "If the demand for furniture continues to rise in IKEA's second year in Romania sales could advance by around 15%," added Oprisan.
In the nine-month interval, almost 2 million Romanians visited IKEA. "The way a store starts out is very important. If it begins by attracting 2 million Romanian shoppers, then it stands a good chance of amortising investments in 4-5 years," said Oprisan.
IKEA has not been harmed by the recent decline of the RON due to the hedging contracts the company sealed. "We've taken precautionary measures, I'm speaking about specific financial hedging tools. The value of sealed contracts amounts to as much as 10m euros," said Oprisan.
Like the other stores the company owns worldwide, the Romanian store is run via a franchise system, by Moaro Trading SRL firm.
In Romania, IKEA operates a store in Baneasa, an office through which it purchases furniture, and the Swedwood plant in Suceava county.
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