Why Brazil still is a no-go for IKEA

Read a more updated version of this article here: No IKEA in Brazil: local furniture brands pose fierce competition

In developed markets, IKEA is positioned as a low-priced mass-market brand, but in emerging markets where low prices are the norm, it targets a growing middle class that aspires to international lifestyle products – among the BRIC, China has already 18 stores and Russia 14 stores.

The company plans to open three new Chinese stores in Guangzhou, Suzhou and Chengdu, while in Russia their revenue fueled an 11 percent increase in full-year (2015) sales.

Ikea opened its first store in August 2018, after few years of consumer research in the country. According to news site Al Jazeera, the store’s opening day attracted a huge crowd. By 10am, 3,000 customers already had entered the store.

So now Brazil is the only BRIC country that doesn’t have an IKEA store. In Brazil, things are always a lot more complicated. On one of my previous posts,  I mentioned why is so complicated for foreigner companies / brands to enter this ever-changing country. Here is some of the reasons I think Brazil is going to be a massive effort for Ikea, if they do choose to take up this challenge:

  • Brazil has very high taxes for imported goods, around 75% or greater over FOB cost. Local companies such as Tok & Stok also face this problem, but probably have already optimized their purchasing to reduce tax impact;
  • Ikea also chooses to buy much of its furniture from very strictly managed local subcontractors. Perhaps, this means that high import duties are not to blame this time. However, many of those goods still would not be competitive enough (Price x Quality) to compete with the Brazilian market equivalent (eg. Tok & Stock);
  • Logistics is a serious problem in Brazil. Ports are slow, the country is huge and internal transportation is limited and expensive;
  • Competition is serious: Brazil already has a strong furniture market with established players, some of them having a model similar to Ikea’s;
  • I suspect that the lobby-groups of Brazil’s large furniture industry have simply prevented Ikea from establishing itself in Brazil. Protectionism is very common in Brazil and happily promoted by politicians.

As long as they haven’t figured out how to solve all of these problems and have a good business plan for Brazil, it is unlikely that they will open a store there. The good news is that they do have an office in Brazil, studying these issues and prospecting the market.

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8 Thoughts to “Why Brazil still is a no-go for IKEA”

  1. Great topic Ana. Good analysis as well. Keep the good work!

  2. Marcos

    Brazil is a non-go for any rational person. This is and ever will be a shitty country.

    1. Rosangela Julian

      I agree 100% with you Marcos.

    2. Oppenheimer

      Brazil is a no-go only to big enterprises that cannot dominate the internal market, or for narrow-eyed people. The potential of Brazil is immense. It depends on what and how you intend to invest. Cheers.

  3. Marcel

    Brazil is a great country run by corrupts…

  4. Angie

    Brazil is not a shitty country. The only problem here are people with shitty thoughts and shitty vision of the future like Marcos and the ones who agree even 1% with him.

  5. John

    This article is full of shit.

    “Brazil has very high taxes for imported goods, around 75% or greater over FOB cost. Local companies such as Tok & Stok also face this problem, but probably have already optimized their purchasing to reduce tax impact.”
    – They just have the better contact to the government. There’s always some paperwork missing for foreign companies.

    “Ikea also chooses to buy much of its furniture from very strictly managed local subcontractors. Perhaps, this means that high import duties are not to blame this time. However, many of those goods still would not be competitive enough (Price x Quality) to compete with the Brazilian market equivalent (eg. Tok & Stock).”
    – Meaning the used material in Brazil is coming from illegal deforestation. Endless soy fields generate a lot of extra wood.

    “Logistics is a serious problem in Brazil. Ports are slow, the country is huge and internal transportation is limited and expensive”
    – Don’t even mention the “special fees” you have to pay at the ports.

    “Competition is serious: Brazil already has a strong furniture market with established players, some of them having a model similar to Ikea’s”
    – A Ikea designer sofa, table, chairs costs half the price in Europe then even the shittiest MDF garbage furniture here in Brazil. The similar companies just copy Ikea designs.

    “I suspect that the lobby-groups of Brazil’s large furniture industry have simply prevented Ikea from establishing itself in Brazil. Protectionism is very common in Brazil and happily promoted by politicians.”
    – Just cut your article to this sentence.

  6. Pedro

    Brazil is a great, beautiful and awesome country. No one cares about Ikea there anyway.

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