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JYSK to open 10 outlets in Shanghai next year

By Zhou Yan (China Daily)
Updated: 2009-05-27 08:08

Jakob Sonnenberg

Denmark-based furniture retail giant JYSK Group is all set to challenge Swedish furniture maker IKEA's dominant perch in the Chinese furniture market.

JYSK, with a turnover in excess of 2 billion euros, said it plans to open six to 10 stores in Shanghai during April and May next year and expand the outlets to 500 across the country in the coming years depending on cash flow.

"Our stores would be around 1,000 to 1,500 square meters each with a wide range of Danish-style home products," said Jakob Sonnenberg, China manager of JYSK Holding. The retailer said 50 percent of its products would be made locally, and this would be increased to 80 percent going forward.

The company currently operates 1,500 stores in 32 countries, most of which are in Europe.

"It's a bold move. Nonetheless, there'll be more upside in the short term in China than in the home market and Europe. The company will also benefit from China's still growing economy and upcoming Shanghai Expo," said Darryl Andrew, CEO of business consulting firm Synovate China.

According to JYSK's 2008 financial report, total profit at its 93 stores in Denmark dropped 4.8 percent from the previous year.

"Generally speaking, a foreign furniture chain's overseas expansion depends on the company's performance back home, where the tepid sales will lead to a more decisive decision to move abroad, " said Li Xiangfeng, retail analyst, Tebon Securities.

Sonnenberg said the company expects to turn profitable shortly after the launch of its new stores, and said he is confident that China's furniture market has room for its outlets.

JYSK's entry is, however, likely to pose some threat to IKEA as both sell similar types of products, Li said.

Related readings:  Furniture industry uncertain  Chinese furniture company buys US Schnadig  Furniture tycoon detained over embezzling state assets in listed company

IKEA, which made inroads into the country in 1998, has seven outlets in China and plans to open one more in Shanghai and another in Shenyang in northeast China in 2010.

Sales at this world's largest furniture retailer rose 7 percent to 21.2 billion euros in its 2008 fiscal year, with China sales accounting for around 2 percent.

IKEA, earlier said it had seen the negative impact from the financial crisis on its business. The firm's public relations manger Linda Xu said this week that IKEA is planning to close three trade offices in Chengdu, Wuhan, and Xiamen to integrate its purchasing businesses and also axe some jobs.

IKEA's sales are likely to remain subdued in 2009, which, in turn, will lead to slower new store expansion, said Raphael Moreau, analyst with research firm Euromonitor International.