Bulgarian fans of Swedish furniture maker IKEA will soon have two reasons to feel delighted. Although construction of the first IKEA store in Bulgaria on Sofia’s ring road has been delayed, expectations are that the IKEA store should start making its appearance at the begining of 2010. Moreover, a second store is poised to open about 150km west of Sofia in the Serbian town of Nis, which will save Bulgarian customers the 300km trip to Thessaloniki or the 400km journey to Bucharest.

Better late than never
The first IKEA in Bulgaria is set to open by the third or fourth quarter of 2011, Georgios Alevizos, financial director of Fourlis, the Greek company that holds the IKEA rights in Bulgaria. Construction was delayed for objective reasons, he said. As in other places, getting the required paperwork in hand took time in Bulgaria, according to Alevizos.

This time around, however,  most of the documentation was successfully  processed, and soon enough, construction will begin. Fourlis foresees building the store at the Sofia Ring Road in Malinova Dolina in the first quarter of 2010. The completion of such a project usually requires about 18 months, which means the maiden IKEA retail centre in Sofia will be ready in a little less than two years.

More good news
Soon, Bulgarians who were prepared to travel hundreds of kilometres just to buy  IKEA goods will have yet another option to do so, but quicker and cheaper.
The reason is the IKEA that is to open in the Serbian town of Nis, where the Swedes are not relying on Greece’s Fourlis but instead are to enter the local market directly, which means that clients will be able to enjoy the real competitiveness of the products and price ranges offered by IKEA.

Although IKEA’s Nis store is poised to open after the one in Sofia is completed, most of its clients are expected to be from Bulgaria and Macedonia, as Nis is a relatively small town which is unlikely to generate the business needed to succeed. However, being only a two-hour drive from Sofia, IKEA is expecting a large influx of Bulgarian shoppers.
Bulgarians will have another incentive to travel the slightly longer distance to Nis and shop there instead of the store near Sofia. If the Nis store opens before Serbia joins the European Union, Bulgarian shoppers will get back the VAT they paid.

Competition and customers
Although there is still time before the two stores open, it is apparent that there will be serious competition between them to attract Bulgarian customers.

IKEA’s Serbian, Croatian and Slovenian operations director Dragan Skalusevic said that the Nis store plans were still at a very early stage and that the store will be ready after the one in Sofia opens. Regarding the advantage from the VAT reimbursement, he said that this depends on Serbia’s law on the issue. Price ranges in the Serbian store will be pegged in accordance with local standards, which he said, "is the traditional policy of IKEA".

Fourlis, on the other hand, is adamant that the Nis operation will not dampen their own ambitions in Sofia. According to Alevizos, the distance that Sofia customers will have to cover to Nis will play a significant role, and besides, the expansion of the Greek company in Bulgaria will not limit itself to the capital.

He said that Fourlis was contemplating further expansion on the Bulgarian market, which includes the country’s Black Sea resorts in particular, followed by a retail centre in Plovdiv. For the moment, however, these are just ideas on the board, as Fourlis has not purchased land outside the capital.

Balkan expansion
Concurrently, IKEA are contemplating expansion further west on the Balkans, for example in Belgrade, although not in the immediate future as the company is yet to find suitable land for its operations and was still discussing other locations, Skalusevic said. 

IKEA’s plans to build up the capacity of operations for the moment have been hampered by onerous bureaucratic complications, poor infrastructure and the high price of land.
"In Belgrade, for example, land is sold at a price sometimes three times higher than similar land in Budapest, while at the same time lacking proper infrastructure," he said.

Apart from this, IKEA envisages establishing a firmer foothold in the region between 2010-2020. The Swedish company has already acquired land in Zagreb, where a store is to open by 2011, and there are plans for a retail centre in Ljubljana.

All this indicated that the Swedes are serious about spreading throughout the Balkans. In July the general manager of IKEA for Russia and Eastern Europe, Per Kauffman, told news agency Reuters that expansion in the Balkans was logical, because eight per cent of the clients in Budapest came from Serbia, while Croatians made up to 25 per cent of the turnover in the IKEA store in Gratz, Austria.

The proportion of Bulgarian customers currently shopping in Greece and Romania was not disclosed, but it is believed to be "substantial".

Kapital weekly, issue 47