IKEA to announce Vilnius plans for 2013

KLAIPEDA - IKEA, the Swedish furniture and accessory giant, is set to step onto, in 2013, Lithuanian soil, in Vilnius, investing 47 million euros into the building of the largest furniture store complex in the Baltics. The Scandinavian furniture giant was expected to announce its Baltic-bound expansion plans this week. It is said IKEA will operate its franchise furniture mart in Vilnius through Felit, an Icelandic company, reported business daily Verslo zinios.
Although Felit has not confirmed the IKEA arrival yet, it is expected the Vilnius store will create a complex infrastructure, taking up several large furniture stores, a Swedish-themed restaurant and a several-store parking lot.

The IKEA Vilnius store is set to be built in the vicinity of Vilnius City, close to Vilnius Airport. In exchange for the so-called “plain field” investment, Vilnius City pledges to build a road leading to the IKEA store complex from Vilnius City’s western bypass road. Lithuania’s Ministry of Transport and Communications had allocated 141.9 million litas (41.1 million euros) of EU funding for building the bypass.

“IKEA will not ask for extra money for the road stretch. The laying of the bypass road had been foreseen before the IKEA bid was known, therefore, it [the bid] does not affect the project. In 2013, during the year of the Lithuanian EU presidency, it is planned to have two main exit roads from Vilnius Airport,” says Mantas Pocius, head of “Investuok Lietuvoje” (Invest into Lithuania).

Vilnius Mayor Arturas Zuokas had hinted about IKEA coming, but with no evidence proving it, the words have been dismissed as an election campaign promise.
IKEA has invested 50 million euros in each of its 25-32,000 square meter stores in Romania, Bulgaria and Russia. The initial tag of the Vilnius investment is said to be at 47 million euros; however, further infrastructure investment, totaling an additional 60 million euros, into IKEA’s 14-hectare Vilnius lot may be assumed.

Rimantas Zylius, Minister of Economy, neither confirms nor denies the IKEA arrival. He admits, nevertheless, that there have been several endeavors to lure the Swedish giant into Lithuania. “Large foreign companies, like IKEA, make investments, led by very tangible business opportunities, not by some sentiments. If a company of this size comes to Lithuania, it means that the recent years’ Lithuanian government politics and the endeavor to ensure a stable situation have worked out, and that the investor has assessed the efforts positively,” Zylius said.

The IKEA bid has sent shivers across the aisles of Lithuanian furniture makers as anticipation of a possible market shake-up linger. Dalia Markeviciene, director of Siguldos baldai, a furniture enterprise, says that the arrival of the Swedish furniture maker will have, perhaps, a smaller or bigger impact on all.
“Our enterprise should not be affected very much by the new rival, as we specialize in making hotel furniture. We also produce kitchen furniture upon special orders. I think the impact will be felt mostly by serial soft and [frame] furniture makers. Also, for the enterprises that specialize in furniture sales, as, at least in the beginning, IKEA will lure customers by all means,” Markeviciene noted.

She also points out that IKEA’s presence in Vilnius may turn out to be beneficial to all furniture sellers.
“If IKEA focuses not only on the Baltic region, but also on Kaliningrad and Belarus, buyers from these countries may swing by Lithuanian furniture salons as well,” says the Siguldos baldai director.
Jonas Karciauskas, director of Audejas trade center, agrees that with the IKEA arrival, the rivalry in the market segment will surge. Therefore, he maintains, Lithuanian furniture sellers may review their profit margins or switch to other furniture segments. “There are not so many options for how to prepare for the IKEA arrival. Our production is oriented to the middle class, meanwhile, theirs to savings-conscious customers. I do not think that all our customers will run to the rival,” Karciauskas said to Verslo zinios.

Market experts contemplate that the Swedish furniture maker can hit Jysk and SBA Idejos namams salons most, as well as Akropolis furniture centers and interior commodity stores.
Jaunius Ziogas, SBA Idejos namams (SBA Ideas for Home) director says, though, the Lithuanian furniture market is very small and does not correspond to the IKEA expansion demands. The appearance of the new market player will make the segment’s old-timers perform better.

The entrepreneur says that SBA Idejos namams offers a wider selection of interior details than IKEA, as well as a bigger variety of furniture, not only of the Scandinavian style. He believes that SBA Idejos namams customers, having taken a look at what the Swedes offer, will come back to SBA stores.
Tomas Giedraitis, project manager of Vildika, an office furniture maker, notes that “half of Lithuanian furniture makers” have been working for IKEA until now. “Sure, I exaggerate a bit, but, as far as I know, all major national makers produce furniture fittings and assembling parts for IKEA. Among these, are Vilniaus Baldai, Baldai and a Visaginas furniture enterprise,” Giedraitis said to The Baltic Times.

He asserts that the Swedes will not impact Vildika in any way.  “We are focusing on office furniture production and IKEA targets the home furniture segment,” the Vildika manager said.