Instead of buying furniture or decorative items in the new stores that the Swedish company Ikea opened in Chile a year ago, today the main plan of residents of the country’s capital Santiago is to eat meatballs. The modest price of the plate of meatballs with mashed potatoes and blueberry jam – about $5.6 (5.2 euros) – has captured the taste buds of diners in the South American country. In its first year of operation in the local market, Ikea sold 1.5 million meat or vegan meatballs.
The arrival of the multinational company in Chile, the first in South America, was eagerly awaited by consumers in that country. So much so that on August 10, 2022, the day of its inauguration, the line of people wanting to enter to see the news of the Swedish store formed at dawn and was already passing through several surrounding streets at noon. However, disembarkation was not that easy. The first few months were characterized by slow deliveries via the electronic sales channel and lack of stocks of some products.
It turns out that neither the Swedes nor the Chileans at Falabella, the retail giant that owns the Nordic Group franchise in the South American market, were prepared for the enormous online demand generated by the premiere in Chile and the even exceeded that of the company in the United States. This was confirmed by the manager in charge of the business in South America, Francisco Irarrázaval, to the local press: “We have 50% higher e-commerce penetration than the rest of the world, which are developed countries.” We did not expect “We would achieve greater market penetration than in the United States and slightly less than in the United Kingdom, where the use of e-commerce is very high.”
The products most sought after by Chilean consumers – besides meatballs – are the bedroom furniture series and iconic desk furniture called Kallax and Billy.
Visits to the Ikea store are mainly concentrated on weekends. And it’s quite a plan for the family. People spend an average of three hours in the store, one hour in the exhibition area, another hour in the restaurant and then another hour in the eco-house area. Of course, according to the numbers, Chilean consumers prefer the company’s website to shopping locally.
Weak consumption
But although demand for products has increased, forecast sales in the South American country are still slower than expected. There is no official information from the company on this, but the consolidated figures for Falabella’s home renovation division, which includes Ikea, reflect this. In the first half of the year, sales in this category fell by 23%. The reason is that post-boom consumption in Chile was low between 2021 and part of 2022 due to deductions from contingency funds approved by Congress as part of measures to support families amid Covid-19.
In addition, Ikea’s prices in the Chilean market were not as competitive as promised. And amid current economic uncertainty – Chile could see a 0.5% drop in GDP this year or suffer stagnation, according to central bank forecasts – families are opting for essential products. The challenge for Ikea now is to conquer Colombia, where the Swede plans to open its third store in South America in the second half of 2023.
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