Exclusive
'Japan's IKEA' Nitori to Close Incheon Yeonsu Branch

[비즈한국] Nitori, often referred to as 'Japan's IKEA,' is struggling to gain a firm foothold in the domestic market. With the closing of its Incheon Yeonsu branch at the end of this month, only 3 Nitori stores will remain in the country. Facing a downturn in the domestic hypermarket sector, Nitori has decided to abandon its strategy of opening stores inside marts and is instead looking to make a comeback by opening smaller stores within shopping malls.

Stung by Homeplus Crisis, Closing Mart Stores

Nitori has decided to close its Homeplus Incheon Yeonsu branch. The Nitori Homeplus Incheon Yeonsu store will continue operations only until the end of this month before closing its doors. When visited on the 7th, the Incheon Yeonsu branch was in the midst of clearing inventory ahead of its closure. Display items and more were being sold at discounted prices due to the closing sale, and empty spaces on shelves were clearly visible. One visitor expressed regret, saying, "The store was always quiet whenever I visited, but I didn't expect it to close this quickly."

With the closure of the Incheon Yeonsu branch, only 3 Nitori stores will remain in operation domestically: Homeplus Yeongdeungpo, Gangdong IPARK The River, and Connect Hyundai Cheongju. Effectively, the "in-mart store" format, which Nitori touted as a core strategy when first entering Korea, will now be maintained only at the Yeongdeungpo location. A Nitori Korea official stated, "We have decided to reorganize our in-mart store locations. While there is a possibility (of closure) for the Yeongdeungpo branch, nothing has been finalized."

Nitori, the largest furniture brand in Japan often called 'Japan's IKEA,' first stepped into the Korean market in November 2023. It signaled its full-scale entry by opening its first store at E-mart 139480 Hawolgok in Seoul and announced an ambitious plan to open 200 stores within 10 years.

At the time of its entry into Korea, Nitori chose an 'in-mart' strategy. Starting with E-mart Hawolgok, it expanded its stores in a 'shop-in-shop' format within large hypermarkets, including Homeplus Yeongdeungpo, Gayang, and Incheon Yeonsu branches, E-mart Hwaseong Bongdam, and Homeplus Geumcheon. This drew attention as a strategy directly opposite to IKEA's method of building standalone stores on the outskirts of cities.

Keigo Onuki, CEO of Nitori Korea, emphasized at the local launch press conference, "We are inducing customers who visit marts to also visit Nitori for their shopping," adding, "Our strength is that we pursue stores where customers can arrive within 30 minutes."

However, this year, Nitori has been phasing out its in-mart locations. Following the closure of E-mart Hawolgok in April, Homeplus Geumcheon and Gayang branches closed in June. E-mart Hwaseong Bongdam withdrew in August, and the Homeplus Incheon Yeonsu branch is slated for closure at the end of this month. This means 5 stores have closed consecutively this year alone. Nitori stated, "Our current expansion strategy has changed completely from the initial phase," adding, "We plan to expand our stores into shopping malls and other venues rather than hypermarkets."

Industry experts analyze that Nitori's strategic shift was inevitable as the domestic hypermarket sector continues to struggle. As online grocery shopping has expanded, the number of consumers visiting hypermarkets has decreased, making it difficult for the shop-in-shop strategy to achieve expected results. The recent Homeplus situation has further highlighted the limitations of the hypermarket channel. One of the reasons for the failure is also cited as the fact that Nitori's core customer base—single and two-person households—hardly ever visits large hypermarkets.

A Nitori official also explained, "We were not unaffected by the Homeplus situation," and added, "Even when analyzing customer visit tendencies, the efficiency of stores within shopping malls was much higher, so we have completely revised our expansion strategy."

New Store Openings Early Next Year: "Compact Stores in Shopping Malls"

Nitori is also taking a stance to change its expansion strategy, which has focused on large-scale stores. The first store, E-mart Hawolgok, opened at approximately 900 pyeong, and the Homeplus Incheon Yeonsu branch, facing closure, also has a floor area reaching the 800-pyeong range. Most stores were operated as large outlets of 500 to 1,000 pyeong to allow customers to experience various furniture and lifestyle goods in one space.

However, as domestic consumers' preference for online shopping has grown, the efficiency of large stores has fallen. Consequently, Nitori is shifting its direction toward a 'compact store' strategy to reduce operating costs and increase accessibility. A Nitori official said, "Even at the global headquarters level, there is a trend toward shifting to compact store formats," and added, "In Korea as well, we plan to clear out large stores in line with this trend and focus our expansion on compact stores in the future."

This year, Nitori newly opened the Gangdong IPARK The River and Connect Hyundai Cheongju stores. Both stores took the form of being located within shopping malls and department stores, not hypermarkets, and are characterized by a more downsized scale of 200 to 300 pyeong compared to before. Furthermore, the company is responding to changing consumption trends by reorganizing stores to focus on home furnishing products and accessories rather than furniture-centric layouts.

Nitori plans to continue this type of expansion strategy next year and attempt a fresh leap in the domestic market. Nitori stated, "The opening of 2 new stores early next year has already been confirmed," adding, "The rumors of withdrawal from the Korean market, raised in some quarters, are not true. We are maintaining our original goal of opening 200 stores within 10 years and are steadily moving toward that direction."