IKEA's presence to enlarge

The second-largest IKEA store in Europe will be built in the Czech Republic. The furniture store will go in next to the current, but much smaller, one in Zličín within the next three years. The current location will be leased out by the company.

The new store, to be only slightly smaller than the one in Denmark, will be a part of the Avion Park shopping mall, and will consist of 42,000 square meters of "environmentally friendly" building materials. IKEA emerged as one of the few success stories of 2008, as profits grew in relation to its popularity in the Czech Republic.

"IKEA is very popular among Czechs, and we therefore decided to invest in a bigger and better shop, strengthening our position on the market," said IKEA spokeswoman Jindra Válová.

IKEA has four locations nationwide - two in Prague - and, in 2008, its net profit reached 645 million Kč. Total revenues for its stores, including the restaurant and food corner, increased 1 billion Kč to 6.8 billion Kč year on year. IKEA has enjoyed growing profits on the Czech market since the very moment it launched sales. The company plans to invest more than 2.5 billion Kč ($122.9 million) to build the new location.

Furniture - and more

"Only five years ago, such a big investment as we are doing now would not have been possible for us. But our revenues have allowed us to do so with time," Andrew North, head of the Czech branch, told the daily Hospodářské noviny Jan. 12. The larger store will carry a broader variety of new products, in line with company policy that all products be available in-house rather than in separate storage facilities.

"With the new opening, we will offer a new assortment [of products], making sure to maintain an environmentally friendly character. The new IKEA will serve as a full warehouse, and no external storage will be needed," said Válová.

With the bigger outlet to house the furniture and household goods, IKEA also has designs on breaking into less tangible offerings, such as credit. The company is planning to ofer co-branded payment cards and other commercial services to half a million members of the IKEA club in Slovakia and the Czech Republic. Advantageous health insurance will be available for IKEA employees.

"In cooperation with banks and payment card companies, we will offer customers discounts on their purchases. We might even launch cooperation with mobile operators," said Válová. The company is in a tender process to select a partner for the co-branded cards. Those financial services are expected to be available in the second half of 2009.

IKEA has managed to continue profitably and even expand during a time when most businesses are struggling to keep current assets viable at the very least. The company has maintained profits while decreasing product prices 20 percent in recent years, increasing discounts that consumers with shrinking budgets are now more likely to seek out. Prices will likely be lowered further throughout 2009. On the supply side, IKEA has also profited from dropping commodity prices, which means materials for its products are even cheaper.

"The global crisis has not yet hit our store in the Czech Republic, even though we see that customers are more sensitive to pricing. We can say that the crisis might actually be beneficial for us, since prices of materials are falling, and there is no longer as much pressure to increase employee wages," Válová said.

Bibiána Cunningham can be reached at
bcunningham@praguepost.com