Will IKEA be successful in Vietnam?

In October 2017, Bloomberg reported that IKEA, the furniture retail chain, announced a plan to open shops in Vietnam in the next five years. Some days ago, Hanoi’s Mayor Nguyen Duc Chung has confirmed that the Swedish home furnishings giant plans to build a retail center and warehouse system in Hanoi with an investment of $450 million.

Once operational, the center would be IKEA’s main supply hub for Southeast Asia.

Many Vietnamese say they will become IKEA’s loyal clients after it opens in Vietnam.

“I have been using IKEA’s products for many years. But it takes a long time to order and wait for delivery. It would be wonderful if IKEA sets up shop in HCM City,” wrote Facebooker Thuy Pham.

Total consumption value of the Vietnam’s furnishings market in 2018 was $4 billion. With average consumption of $21 per head per annum, Vietnam is a lucrative market for both foreign and domestic manufacturers.

However, the majority of furnishings brands in Vietnam, such as Nha Xinh, Pho Xinh, Nha Dep, Index Living Mall and BoConcept are targeting the high-end market.

The mid-end market segment is targeted by JSYSK, a brand from Denmark, and Uma, established in Vietnam by a Swedish owner.

JYSK has had eight shops in Hanoi and five in HCM City, while Uma has eight in Hanoi and not nine in HCM City. The mid-end market segment is still large enough for more manufacturers.

Doan Quang Hung, head of marketing pision of V-Home, said that counterfeit goods are flooding the market and it is difficult to differentiate genuine from fake products.

IKEA products have been used in Vietnam for a long time. They fit apartments and small houses with modern and reasonably priced furnishings.

Some analysts pointed out that IKEA’s products are not highly appreciated in quality compared with Vietnamese-made products.

However, for young consumers, beautiful design is the most important factor. They don’t need extremely durable products to use for a lifetime.

An interior decorator in Hanoi said that IKEA’s products will not be cheap compared with popular products in Vietnam. However, IKEA’s prices will include warranty services.

“I think IKEA will be just like Zara and H&M in Vietnam. It will be considered a high-end brand in Vietnam,” he said.

VNF ( Vietnamnet )