Founded in 1942 by Ingvar Kamprad, who named the company with the acronyms “I” and “K” standing for his name, “E” standing for Elmtaryd, the farm where he grew up, and “A” for his hometown in Sweden, the Swedish company IKEA has expanded into several markets around the world, offering a variety of products to choose from.
IKEA now celebrates its three-year presence in the Egyptian market. With a 36,000 sqm store in Cairo Festival City mall with a full range of household furnishings over two floors, IKEA Egypt offers its customers nearly 7,500 products to choose from.
On its third anniversary, we spoke to IKEA’s manager in the country Adosh Sharma, who expressed his optimism with the Egyptian market and economy. IKEA carries pride in the large number of visitors to the store in addition to its stable and growing sales. Sharma stressed that even though IKEA Egypt has been present for only three years, it was able to surpass the branches opened recently in the Far East with its high sales.
What is the pace of IKEA’s growth in the Egyptian market since its establishment?
During our three years in Egypt, we have had a steady growth rate, and we have taken more than 8.5 million visitors, and the number is only increasing. We are the first store to register growth rates this high in the entire region. We manage to maintain this through our products of Swedish design, but with a lot of effort put in to make it more locally relevant. The result is that the way people have accepted IKEA here is phenomenal.
Where does IKEA-Egypt stand amongst the stores in other markets?
It is very difficult to tell because we have been in the market for over 70 years. There are more mature markets like Europe and the US, and newer markets like Indonesia, China, and Thailand. So it would not be fair to compare IKEA-Egypt to those branches, but we can say that IKEA-Egypt has been surpassing the branches that opened only recently, so our growth rates are very strong. If you compare it to new branches in the Far East, IKEA-Egypt is certainly doing a better job.
What are your plans to increase your investments in Egypt and open new branches?
It takes at least a three-four year cycle to plan, implement, and build an IKEA store, and our workforce includes about 600 people in each store, in addition to third parties like security and home delivery companies, raising the total to 1,000 employees. For a project of this size, expansions are definitely expected which is why we are in Egypt. However, it is premature to tell when and where these expansions will take place, but we are looking at options for the future. Statistically speaking, Egypt is a large market with more than 90 million people, with 50% of the population being young. When you look at how the market has grown and accommodated other brands, and the way we were also accommodated as a brand, it only makes us more confident that the future is bright.
What features do Egyptian consumers look for in your products when they come to IKEA?
We work in IKEA according to a very unique concept called local adaptations. If you look at a store in Switzerland or Stockholm, the same store would look very different because of the way we exhibit our products in each country. When people come to IKEA, they are mainly looking for solutions and nice ideas to maximise space utilisation, using very simple straightforward products that also look inspirational. That is what we are looking at in IKEA. It is what characterises us, and what our customers know they come for.
How do you apply the local adaptation concept in Egypt?
If you look around IKEA, every room here has a story and a reason. Every year we undertake a study where our team of designers visits local homes, and they go about noticing how they live and interact with their homes. Each time a room is made, we visit friends and family and new people to get inspired. When the designing process takes place, we try to look at functions and ideas that can be practical, provide a low cost for customers, and add value to rooms. That’s the success of our room sales. It starts with a story, then with a function, then inspiration. All of this comes together and then these are the results that suit each local customer.
How many units do you sell annually and which ones have the highest demand?
We sell eight to nine million units every year. We can say that our sales are evenly spread on all our products, mainly because some products actually serve others. An example is when you come to buy a sofa you probably buy cushions too, and when you buy a dining table you buy the chairs. There is a lot of connection between the products and so it is tough to say which ones achieved the highest sales.
It is important to note that we don’t sell furniture, we sell solutions. When you come to IKEA looking for a sofa, we would like to think that we are selling you seating for your living room for you and your friends, and we suggest you add an arm chair and a coffee table for your entertainment gatherings.
However, our iconic products of course achieve a large volume of our sales. They include the Billy bookcase, which has been sold for over 40 years now, in addition to our 40-year old Poang chair, for example.
How are the difficult economic circumstances of the Egyptian economy affecting your business, including the price of the US dollar?
There is a key philosophy that we stand by in IKEA. It’s that there is never a problem. A problem is always an opportunity. We have actually faced this opportunity a couple of months ago when importing was restricted. On the other hand, in terms of the dollar issue, we are aware that the dollar situation is affecting everything, so it will definitely affect us. But the good news is, we welcome 6,000 to 7,000 customers on a weekday, and 14,000 on the weekends. On Black Friday, we welcomed about 23,000 visitors. The fact that we have these numbers shows that we are okay with the dollar price right now, and we work our way around it, and will continue to do so.
What are the main challenges and opportunities you see in the Egyptian market?
Opportunities are abundant, so we are here for the long run. We feel that Egypt still holds a lot of potential, and the only challenges we see are the few obstacles that come every now and then, but with our sales and growth, as well as the way policies are being structured, we believe it is only a matter of time before we go back to the same path we were on.
What are IKEA’s strategies and plans to maintain sustainability?
IKEA has played a role in sustainability. For example, it has participated strongly in the the climate change conference held recently in Morocco. It is globally one of the few corporations that supports sustainability. This is done through a process called the Democratic Design Process. It’s a five-stage process that starts with form, function, low price, sustainability, and quality. Sustainability is a key feature of that process and a small example is the Billy bookcase, the first product in the world produced of a board on a frame where the wood-based frames are filled with recycled and honeycombed paper. We were also the first company to clearly state that starting from 2013 we would stop selling any incandescent lightbulbs in our stores and be the only ones who sell LED. We also have water taps that come with a water saving feature that regulates the flow of water based on your need. In terms of operating our store, we are the only company to actually reduce our utilities.
What are IKEA’s social responsibility activities in the country?
We have several activities in this area. In April, IKEA Egypt hosted the children of Qafelat Al Kheir orphanage for a day with Muppet show animations, magic tricks, balloons, and face paintings. We also repainted their orphanage, which came as a great surprise to the children.
We have also cooperated with the Tahya Masr initiative to develop low cost housing proposals, and we provided internship programmes for Egyptian students at IKEA who have learnt a lot and now have a sense of belonging to the company. Most recently, in partnership with UNICEF and Save the Children, this year’s “Good Cause” campaign, which serves the “Children’s Right to Play and Develop”, IKEA decided that for every toy and book sold during the campaign period, it will donate €1 (equivalent to EGP 20) to projects in some of the poorest communities around the world. IKEA continues to serve the communities its part of around the world, and now it is working to bring more of these activities to Egypt.