Why IKEA is struggling in Korea

Interior view of the IKEA Gwangmyeong store in Gwangmyeong, Gyeonggi Province, at 2 p.m. March 3 / Korea Times photo by Lee So-ra

It is Tuesday afternoon at IKEA’s Gwangmyeong store on the outskirts of Seoul. On the second floor, Lee, a man in his 30s visiting with his wife and 1-year-old child, is busy taking photos of furniture displays.

He says he came not to shop, but to gather ideas for decorating his baby’s room.

“I’ll probably look online first to see if there are cheaper options with similar designs,” Lee said. “I’m not buying anything today.”

His remark reflects the subdued atmosphere inside the store. Aside from office workers using laptops and groups of mothers gathered in the second floor restaurant, only a handful of shoppers walk through the showroom.

Most are seen placing small “loss leader” items costing less than 30,000 won ($20) in their carts, or simply taking photos of the furniture on display. There is little sign that shoppers intend to purchase IKEA’s core products — furniture.

The scene is far from the crowds that packed the store when it first opened in December 2014, when eager customers lined up outside. Even allowing for the passage of time, the quiet atmosphere does little to match IKEA’s image as a global furniture giant.

When IKEA first entered Korea, it put the domestic furniture industry on edge. In its first year of operation in fiscal 2015, the Gwangmyeong store generated 308 billion won in revenue — despite being the company’s only outlet in the country at the time, immediately placing IKEA third in the industry. The company started to expand its footprint, opening new stores roughly every two years.

But starting in 2022, both sales and profits began to decline. Years of sluggish performance have raised concerns, with rumors of IKEA’s possible withdrawal from the Korean market circulating online.

The rumors remain unfounded. But they suggest warning signs are emerging both inside and outside the company.

So how did the world’s largest furniture retailer — with 483 stores across 59 countries as of May last year — see its growth stall in Korea in less than a decade?

Exterior view of the IKEA Gwangmyeong store in Gwangmyeong, Gyeonggi Province. Courtesy of IKEA Korea.

Operating profit plunges 88% in 2023

IKEA initially gained attention in Korea for its transparent pricing.

In the past, Korean consumers typically visited furniture districts or department stores to buy furniture. Prices often varied from store to store even for the same item, forcing shoppers to compare options in person.

However, IKEA lowered prices significantly through its do-it-yourself (DIY) assembly model and fixed pricing system, sparing customers the fatigue of negotiating prices.

Its showrooms also showcased Nordic-style interiors, creating the appeal of stylish living spaces that could be achieved at relatively low cost. The stores allowed customers to try products freely without pressure to buy, and they could view everything from large furniture to smaller items and household goods in a single showroom, another major advantage.

As a result, IKEA's sales grew steadily year after year. Revenue peaked in 2021 at 687.2 billion won as demand for home furnishing increased during the COVID-19 pandemic. But that proved to be the high point. Sales declined for the next two years, and even last year, when a new outlet opened, revenue remained in the 630 billion won range, effectively showing little growth.

Profit has deteriorated even more sharply. Operating profit fell from about 30 billion won in 2021 to 21 billion won in 2022 before plunging to roughly 2 billion won in 2023 — drops of 25.5 percent and 88.1 percent respectively.

Although profit rebounded to around 18 billion won in 2024, it fell again to about 10 billion won last year.

While not the worst result, it was hardly something to celebrate.

DIY becomes setback

The shift toward online shopping following the COVID-19 pandemic was the first blow to IKEA. As online platforms began offering bundled services that combine delivery, installation and after-sales support, IKEA’s sales strategy centering on large offline stores began to lose its effectiveness.

For shoppers, buying from IKEA often meant traveling to suburban stores on weekends and handling transportation, assembly and installation themselves — a process many increasingly viewed as inefficient.

IKEA's once-distinctive price advantage also eroded as online competitors such as Coupang and Ohouse emerged, offering lower prices and assembly services. Moreover, online marketplaces have become filled with products that closely mimic IKEA’s designs, making so-called “knockoff IKEA” furniture easy to find. From the buyer’s perspective, this means they can recreate IKEA-style interiors more conveniently and often at a lower cost.

An industry official said IKEA has found itself stuck in an awkward middle position.

“IKEA is not particularly cheap compared with value-for-money products sold online, but it is not positioned as a premium brand either,” the official said. “It has ended up with an ambiguous market position.”

The person added that the Korean market is increasingly polarized between low-cost and high-end consumption.

“Unless a company clearly defines its positioning and target customers, it is difficult to achieve growth,” the official said.

IKEA’s signature self-service model, often described as “selling inconvenience,” has also worked against it. For Korean consumers who prioritize fast delivery and convenience, assembling furniture themselves can feel like a significant burden.

While IKEA offers optional services in which staff handle assembly and installation, each comes with additional fees, reducing the company’s price advantage.

Seo Young-gu, a professor of business administration at Sookmyung Women’s University, said IKEA’s strategy has traditionally been to lower prices while offering customers a sense of engagement and enjoyment through self-assembly.

“But looking at the lifestyles of Korean consumers, many are busy and exhausted,” Seo said. “It is not an environment where that strategy can easily drive rapid growth.”

IKEA’s strategy also struggled to align with its target customers. While the retailer sought to appeal to the so-called “MZ Generation” — a Korean term referring to millennials (born 1981-1995) and Generation Z (born 1996-2012) — many of these consumers live in small studio apartments and often do not own cars. IKEA’s large stores, typically located in suburban areas, are therefore less accessible to them.

Critics also say the showroom layout, which guides shoppers past displays for every product category before they can exit, can increase “shopping fatigue” by forcing customers to spend long periods inside the store.

Customers line up to enter the IKEA Gwangmyeong store on its opening day in Gwangmyeong, Gyeonggi Province, December 2014. Yonhap

Complete strategy shift

Facing the changing market environment, IKEA recently scrapped its plan to build a logistics center in Pyeongtaek, Gyeonggi Province, a project it had been working on since 2020. Instead, the company has been strengthening its digital strategy by improving the convenience of online shopping, including introducing remote consultation services.

Through real-time video calls, the service helps customers design layouts tailored to their living spaces by recommending combinations and placements of products, and even assists with preparing orders.

Over the past two years, IKEA has also shortened delivery times by introducing an automated warehouse system that utilizes artificial intelligence robots to perform product packaging.

IKEA is seeking changes in its offline business as well. Moving away from a strategy centered on large suburban outlets such as its Gwangmyeong and Goyang stores in Gyeonggi Province, the company has begun opening locations in urban areas.

One example is the IKEA Gangdong store, which opened in April last year in Seoul’s Gangdong District as the company’s fifth outlet in Korea. It is IKEA’s first store in Seoul and also the first in the country to be located inside a mixed-use shopping complex rather than operating as a standalone big-box store — the iconic format often referred to as the “blue box.”

The retailer is also operating pop-up stores at major department stores and shopping malls, including Lotte Department Store’s Gwangju branch, Times Square in Yeongdeungpo and Hyundai Department Store’s Pangyo branch in Seongnam, Gyeonggi Province.

By improving accessibility so customers can visit without a car, IKEA hopes to attract more shoppers from the MZ Generation.

Interior of the IKEA Gangdong store in Godeok-dong, Gangdong District, Seoul, April 11, 2025, during a media day event / Yonhap

Integrating online and offline

IKEA says the ultimate goal is to create an “omnichannel” retail environment, integrating online and offline shopping. The idea is to connect two channels organically, so shoppers can place order online and pick them up at offline stores.

"We’re trying to come up with ways to keep IKEA’s brand philosophy of Nordic design and self-assembling, at the same time improving service to fit to needs of Korean consumers,” an IKEA official said. “We plan to strengthen our competitiveness as an omnichannel home-furnishing retailer.”

Some experts say it’s too early to talk about IKEA’s decline.

“As Korean consumers increasingly seek to express their individuality through interior design, demand for home furnishing changes will continue,” Seo said. “With the number of single-person households also rising, the market environment remains favorable for IKEA.”

He added that the company’s future success will depend on how effectively it builds an omnichannel strategy to attract younger consumers.

But others are less optimistic. Industry observers say creating a more user-friendly online purchasing environment is not enough, and that companies must fundamentally change how they communicate with consumers.

“In the current market environment, companies need to strengthen online marketing through various approaches, such as creating online spaces where younger people can gather and leveraging influencers,” an industry official said.

“Getting younger consumers to engage online with IKEA products could help revive purchase interest.”

This article from the Hankook Ilbo, the sister publication of The Korea Times, is translated by a generative AI system and edited by The Korea Times.