Ikea Centres to increase megamalls in China

The Livat shopping center, developed by Ikea Centres China, in Wuhan, Hubei province, is a popular destination for local consumers. (Photo/China Daily)

Centres China, Ikea Group's megamalls unit that entered the country in 2009, is firming up plans to replicate its success in three Chinese cities across the country.

Beginning 2020, it will open one megamall per year.

Typically, a megamall is a shopping mall with an Ikea store, and the future ones may also have apartments, hotel or offices.

The megamalls developed by Ikea Centres China are also known as Livat shopping centers.

In China, its megamalls are located in Beijing, Wuxi in Jiangsu province and Wuhan in Hubei province. They involved investment of 10 billion yuan ($1.44 billion).

Ding Hui, president of Ikea Centres China, said the three centers have been like tests, and produced encouraging results. Hence, Ikea has decided to expand across China.

New shopping centers may come up in major cities such as Beijing, Shanghai, Shenzhen and Guangzhou, as well as in second-tier cities such as Chongqing, Xi'an, Wuhan, Hangzhou, Nanjing and Qingdao.

The fourth in the country, which will entail an investment of about 4 billion yuan, will be a commercial complex in Changsha of Hunan province, Central China, according to Ding.

"It'll have a shopping mall, Ikea store, apartments, a hotel as well as offices. It will be the first of its kind as other centers don't house apartments, hotel or offices," Ding said.

The Wuxi center, the first Livat venture in the Chinese mainland, opened in June 2014. According to Ding, over the past two fiscal years, it saw a 32 percent growth in revenue and 27 percent growth in guest flow to 14.1 million.

The three shopping centers registered 52.6 million visits in Ikea's fiscal year between September 2015 and August 2016. Combined sales were up 36 percent at 7 billion yuan.

"Through the last year's budget, Ikea Centres China funneled 25 billion yuan into the development of shopping centers. This will continue until 2025, to ensure one new project comes up per year from 2020," said Ding.

"Land deals and project sales can no longer generate sustainable profits. So, the competition between shopping malls will become even fiercer in the foreseeable future. This will be a good opportunity for companies such as Ikea Centres China," said Ding.

Furniture giant Ikea's malls foray signifies how iconic companies are diversifying for long-term sustainability.

The Nikkei Asian Review recently reported that railway and hospitality group Odakyu Electric Railway is joining forces with the operator of Muji stores to open a hotel next year in China.

"In the past few years, Chinese conglomerates diversified successfully in China. Now, international brands like Ikea and Muji are trying to do the same for better localization," said Chen Sheng, president of the China Real Estate Data Academy.

Livat shopping centers in China will house companies and brands like Ikea Retail, Auchan Hypermarket, Suning Electronics, Jinyi Cinema, Decathlon, Zara, Mango, H&M, C&A, Gap, Uniqlo. Besides, there will be food and beverage facilities, and entertainment areas for children.

"Ikea Centres China is in talks with leading international hotel brands, including Marriot, InterContinental and Hilton for the hotel space," said Ding.

According to him, the hotels will be of three-star variety, but will provide four-star hotel experience to customers like middle-income families and business travelers.

Tastefully done up flats complete in all respects will target young working professionals and newly-weds.

Offices will offer shared spaces like pantry, meeting rooms and conference chambers to tenant companies.