Unlike the economic situation in the Ukraine, the country next to Russia that has been stymied by corruption, and well, Russian soldiers, Russia itself has been calm and looks like a strong buy in the long term to the Ikea Furniture chain based in Sweden.
Company officials at Ikea specifically mentioned that they felt the latest downturn in the Russian economy was temporary, making it a good time in the real estate investment curve to pour money into expansion.
When Ikea first entered Russia, fans of their furniture and food were ecstatic that they finally had some choice that was inexpensive and stylish in the furniture category. Five years ago, that popularity brought on an earlier expansion effort that saw Ikea with a need to negotiate with the local government in order to get the proper permits to expand. Thinking that they were doing the right thing by using a special program designed to weed out corruption in the bid process, they fought off several efforts by local authorities to try and get them to bid on time for the process. Unfortunately, at the end of the process, the company identified two company officials that were not able to say no to officials requests for bribes. Those company management people were removed from their jobs and Ikea then waited a few years for the environment to improve before making its move.
One of the first things that is mentioned in Ikea’s new expansion plan is the concept of taking a food court and expanding both the menu and the seating options within the context of existing mall stores. In Russia, some Ikea stores are located in Mega Mall shopping complexes that allow them to either blend their food offerings in with other restaurants or provide their own restaurants within their store. It is thought that by allowing more shoppers the space to dine, more families and people will be able to refresh themselves temporarily so that they can spend more time inside the store.
Another solid expansion plan is to open another store in the Moscow area. For company officials, this is the type of expansion choice that caused problems in the past, but seems safe today. The new store will be located in a Mega Mall setting in the Mytischi area. Like some of the eleven other Mega Malls, Ikea has committed to build out the entire mall and then serve as an anchor tenant in part of it, with other similar types of stores clustered around it. The latest mall that the new store will go into should be over 200,000 square meters in size. The parking lot capacity will be 10,000 cars.
