Scale of the disaster
On the first of September, one own IKEA factory in the Leningrad region still resumed work, and the rest were supposed to start on September 5th. According to our data, IKEA will load the factories by no more than 10% in order to prevent people from running away and the equipment not to deteriorate during the downtime. The company never attracted its former partners.
Partner factories are rebuilt slowly and survive as best they can. St. Petersburg Salotti places products that it used to make under IKEA on marketplaces. The Gomel factory “Delkom40” is underloaded, and we invited several employees from there to work with us. At the Nizhny Novgorod Lastra, which was also an IKEA partner, we placed a large volume of orders in the early summer of 2022, when the demand for cabinet furniture grew and we did not have enough capacity of our factory.
For 22 years, IKEA has covered several industries in Russia and involved a huge number of entrepreneurs in its orbit. Factories are the most talked regarding, but far from the only ones on the list affected by its closure. They are followed in a long list by logistics companies. IKEA did not have its own fleet of vehicles, but it had partners in every city to deliver to customers. At the time of the closing of outlets, hundreds of trucks were suddenly released.
Since the closing of IKEA stores, we have regularly received offers from its former partners who have lost a stable business. We even received a letter from the Iteko transport company with a revenue of more than 25 billion rubles a year and more than 3000 units of equipment in our own fleet. Iteko, of course, was not at all lucky: in addition to IKEA, the company served several other multinational giants that have left the market, including Coca-Cola and Shell.
Our interaction with Iteko did not go beyond the letter. But we were able to expand the partnership with another company – Vezu, which also worked with IKEA. At the beginning of the year, it allocated regarding 30 cars for the delivery of goods to Divan.ru in seven cities where IKEA has a presence. Now we bring their number to 49 cars. In the Moscow market, Vezu replaced our former partner, who raised prices by 30% during the pandemic, when the logistics market turned out to be overheated. The IKEA situation brought back the buyer’s market and allowed us to choose.
Another type of company affected by the departure of IKEA made money not only on delivery, but also on the sale of its furniture in different cities and countries. Such intermediary companies also dealt with OBI, Hoff and other furniture brands. However, according to our data, it was IKEA that occupied the majority of their revenue. Some didn’t sell anything but IKEA and their future is now in question. Now all these companies are looking for new partners: we see that the market is flooded with such proposals. We managed to communicate with companies of various sizes – from the large Yaroslavl “Vamdodoma” to the Kazakhstani “Homm”. At the moment, we have agreed with Imarket, which used to sell IKEA furniture in Belarus, and now sells our furniture there.
The total losses of retailers and logisticians from the IKEA closure are difficult to estimate – there are too many of them and they are too different to be collected and counted. The scale of the disaster can be seen in the example of one of our partners. The cost of the capacities employed by IKEA and now vacated in Moscow alone, at today’s prices, reaches 350 million rubles.
From marketing to social business
In addition to brutal logistics and retail, the creative class also suffered. According to the data that Mediascope provided us (Forbes has a screenshot), IKEA invested almost 1 billion rubles a year in , excluding performance marketing. Creative agency Instinct, which is part of BBDO, works for IKEA occupy most of the portfolio. Their work was followed by the entire furniture market – they received prestigious international awards and, in fact, promoted not just IKEA, but all modern furniture design in Russia.
Teams of contractors worked with Instinct. With one of them, the Chelyabinsk studio ZBRSK, we recently met for negotiations. We learned at them that for regarding two years the studio was involved in the Kvartiroteka project for the IKEA website – this is a section with 3D-drawn layouts of Russian apartments that might be filled with IKEA furniture, also drawn in 3D. The apartment library was run by 30 ZBRSK employees, mostly designers, not counting Instinct employees and IKEA itself. The project went into crisis with the closure of IKEA. The ZBRSK team, which was involved in it, is now offering its 3D design competencies to other furniture makers, and therefore we are negotiating with them.
Interior designers also complain regarding the closure of IKEA, who actively used its furniture and home accessories because of its versatility, cheapness and, most importantly, delivery times. One of the designers I spoke with said that following IKEA left, projects increased in cost by 30–50%, and the delivery time for a furnished apartment to the customer increased from the standard 28 days to 45–90 days. The reason is that some of the pieces of furniture previously available at IKEA have to be made to order elsewhere. There are designers who were caught in the middle of unfinished projects by the IKEA closure, and their clients still haven’t moved into their apartments.
There is nothing to replace IKEA, and there is no need to: it is not just furniture, but the whole range of accessories and components united by one idea – door handles, baskets in the closet. You buy a chest of drawers – and there are boxes to put in this chest of drawers. Everything fits everything. And now I have to pick it all up in different stores. No one else has anything like it – this is exactly what is missing. Designers’ earnings have fallen, but they are slowly recovering. We expect to increase the share of b2b sales at the expense of designers (sale of services to business. — Forbes), which is now 10%.
Quite unexpected victims of the departure of IKEA, which no one thought regarding at first, are foundations and social business. Before the start of the “special operation”* in Ukraine IKEA collaborated, for example, with businesswoman Guzelya Sanzhapova, who opened the production of honey, herbal teas and natural cosmetics in the village of Maly Turysh near Ufa. For IKEA, there was a sewing workshop with employees from the elderly villagers. Obviously, since IKEA is not working, then this partnership has died out.
Another IKEA ward was Fund for systemic support of people with autism from St. Petersburg “Anton is right here”. In the inclusive workshop of the foundation, workers with autism sewed the ATERSTALLA textile collection and cardholders from the remnants of the fabric – a waste-free production was obtained. Now IKEA is unable to work with the fund, and we have taken its place. At the moment, we are preparing three collaborations with the Anton is Here Near Foundation.
Two sides of the coin
If earlier it seemed to us that the main victims of the departure of IKEA are its partner factories, now we understand that a lot of different companies have appeared on the market, the capacities of which have been released. For furniture makers who stay in Russia, this is a time of opportunity to find new partners who are accustomed to working to high standards in logistics, creativity, and marketing. I think that all those who were left without a customer in the face of IKEA will somehow attach themselves to new companies. And, of course, it will benefit both us and our competitors.
But despite the fact that now we, furniture makers, have the opportunity to take advantage of the benefits that have fallen on us following the IKEA closure, it would be better if it did not leave. The fact is that IKEA has formed, on the one hand, demand (now in Russia, buyers want furniture in a laconic European style), and on the other hand, supply (it has brought up Russian factories). If not for IKEA, the market would be different, and the demand for our products, among other things, would be lower. For example, our sofas were bought as a set for IKEA shelving.
Therefore, even in a situation where our company receives a wave of applications for partnerships, we still hope for the return of IKEA. Without it, everyone can relax once more – there will be a dominance of “collective farm” design and high prices.
The opinion of the editors may not coincide with the point of view of the author
* According to the requirement of Roskomnadzor, when preparing materials on a special operation in eastern Ukraine, all Russian media are obliged to use information only from official sources of the Russian Federation. We cannot publish materials in which the ongoing operation is called an “attack”, “invasion” or “declaration of war”, unless it is a direct quote (Article 57 of the Federal Law on the Media). In case of violation of the requirement, the media may be fined 5 million rubles, and the publication may also be blocked.