[비즈한국] IKEA, currently grappling with lackluster performance, is set to open a new store for the first time in five years. The Gangdong store, opening in Godeok-dong, Seoul, is a project that IKEA has steadfastly pursued even as plans for other locations, such as Gyeryong, Daegu, and a logistics center, were canceled one after another. With the offline home furnishing market in a slump, the industry is focused on how effective IKEA's entry into Seoul will be.
Gangdong Store, in Planning Since 2019, Opens on the 17th
IKEA Korea will open the IKEA Gangdong store in Godeok-dong, Seoul, on April 17. This is the first new store opening in five years since the Dongbusan store opened in 2020. The IKEA Gangdong store will occupy the first and second floors of "Gangdong IPARK The River," a mixed-use shopping mall located in Gangdong-gu, Seoul. This is the first time IKEA, which has historically opened large, standalone stores on the outskirts of cities, has chosen a "shop-in-shop" model within a shopping mall in the domestic market. In addition to IKEA, E-mart139480 and CGV are scheduled to move into the Gangdong IPARK The River building.
The gross floor area of the IKEA Gangdong store is 58,711㎡ (approx. 17,760 pyeong). Compared to the Gwangmyeong store, which has a gross floor area of 130,000㎡ (approx. 39,325 pyeong), it is only about half the size. With a smaller store footprint and a move toward a shop-in-shop model rather than a standalone store, some in the industry analyze that IKEA's declining performance has influenced its expansion strategy.
After a successful run following its entry into the domestic market in 2015, IKEA has failed to recover its performance after growth stalled due to the pandemic. IKEA’s revenue was 687.2 billion KRW in 2021 (fiscal year September 2020–August 2021), but it fell to 622.3 billion KRW the following year and further dropped to 600.7 billion KRW in 2023. Although revenue rose to 625.8 billion KRW in 2024, operating profit was 18.6 billion KRW, a 37% decrease compared to 2021 (29.4 billion KRW).
IKEA decided on the shop-in-shop model for Seoul six years ago. In December 2019, IKEA signed a purchase contract for the space within the Gangdong IPARK The River building. They were preparing for their entry into Seoul even before experiencing the pandemic-induced decline in performance. IKEA had originally planned to open the Gangdong store in 2024, but the opening was delayed until last month when the building’s use permit was finalized.
IKEA’s determination to open the Gangdong store appears firm. Despite pushback from local small business owners and delays in the project, they did not backtrack on their expansion plan. This stands in contrast to the repeated cancellations of plans for the Chungnam Gyeryong store in 2022 and the Daegu store in 2023.
This also reflects the high expectations IKEA has for the Gangdong store. An IKEA representative stated, "As IKEA Korea's first store in Seoul and the first located within a mixed-use shopping mall, we expect that more customers will be able to experience IKEA home furnishings easily and conveniently, thanks to its high accessibility within the city center."
Industry experts predict that IKEA may be able to secure a new customer base by entering Seoul. Lee Jong-woo, a professor of business administration at Ajou University, explained, "Until now, IKEA stores were located in areas that were difficult to access without a car. However, as the Gangdong store offers better accessibility, it is likely to attract many young customers. We will likely see more cases where people use the store as a showroom to browse, then make their actual purchases online."
Limits of Offline Retail: Nitori Scales Down, What About IKEA?
While IKEA is attempting to turn things around with the Gangdong store, the industry landscape is not optimistic. Consumers have closed their wallets due to the prolonged recession, and demand for home furnishings is also showing signs of decline. In particular, as the online market has expanded, demand for furniture and home furnishing goods, which were traditionally bought offline after seeing the items in person, has increasingly shifted online.
Amid the stagnation of the offline market, the expansion momentum of Nitori, IKEA's rival, has also faltered. Nitori, which entered the domestic market in November 2023, ended operations at its first store in E-mart Hawolgok-dong on March 31. At the time of opening its first store, Nitori announced plans to open 10 stores by 2024 and 200 stores within 10 years. With the closure of the Hawolgok store, only five Nitori stores remain in Korea. E-mart stated, "The closure was decided through mutual agreement with Nitori."
Industry experts express regret that Nitori failed to strengthen its online strategy while the offline market was struggling. An industry insider explained, "It is said that if you order furniture at a Nitori store, delivery takes two and a half months. You also have to pay for shipping and assembly separately. There is no reason for domestic consumers, who are accustomed to next-day delivery and free shipping, to specifically seek out Nitori. Without strengthening their online strategy, it will be difficult to survive in the domestic market."
The need for IKEA to expand its online investment is also continuously being raised. While IKEA claims to be strengthening its online channels, critics point out that it lacks competitiveness compared to e-commerce companies that prioritize fast delivery, installation, and low prices.
For its online business, IKEA was preparing to build the largest logistics center in Asia in Pyeongtaek, Gyeonggi-do, but abandoned the plan at the end of last year, citing a "re-evaluation of investment." An IKEA representative stated, "We are currently in the process of selling the site in accordance with internal procedures."
IKEA stated that it would continue investing in its online business by strengthening fulfillment functions within its stores instead of building a separate logistics center. IKEA’s parent company, Ingka Group, has decided to invest 300 million EUR (approx. 430 billion KRW) in IKEA Korea by 2026.
An IKEA representative said, "We have been continuing investments to expand customer accessibility, such as strengthening online delivery through the automation of in-store logistics facilities and introducing customer touchpoints in various formats like pop-up stores. We plan to continuously strengthen in-store fulfillment functions, such as by introducing an order management system that ships products from the most suitable store considering inventory status and distance from the delivery destination."