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Mon 2 Apr 2007 11:10 AM

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IKEA making moves toward electricals

Customers may soon see electronics sold in stores as the Swedish furniture giant makes global expansion waves.

Sweden's IKEA, the world's largest furniture retailer, could start to stock flat-screen televisions and DVD players alongside its Billy bookshelves as it ramps up an ambitious global expansion.

Chief Executive Anders Dahlvig in an interview with Reuters said IKEA aimed to put a "bigger focus" on the living room in the next year, adding accessories for TV and videogames alongside new sofas and storage ranges.

When asked if that could lead to electricals being sold in its iconic blue and yellow stores, he replied: "Maybe. It depends on the stores. They are big, but they are still crowded; there are lots of products we would like to have in there."

However, Dahlvig cautioned that privately held IKEA, one of the world's most recognised brands, should not expand too fast into new product areas as it risked weakening its core business.

"There are so many temptations in this direction; we can put our logo on anything and it would probably sell. It's a little bit like an iPod or Apple or Nike," he said.

From the sale of inexpensive, self-assembly furniture, IKEA's billionaire founder, Ingvar Kamprad, has built an empire spanning 237 stores in 35 countries and territories.

Forecast revenues for this year are nearly 20 billion euros ($27 billion), and IKEA expects to keep up its pace of 20 new store openings a year, including as many as two vast 40,000 square metre outlets in China every 12 months, Dahlvig said.

Any move it made into the electricals market would be a competitive challenge to a slew of retailers, from world leader Wal-Mart Stores Inc. to U.S. Best Buy and Europe's largest electricals chain, DSG International.

Aggressive expansion

Dahlvig has led IKEA's aggressive expansion since 1999, growing the chain beyond its core German, U.S and UK markets.

It printed 176 million catalogues this year, 10 percent more than 2006, giving it the world's largest circulation.

Croatia, Slovenia and Serbia are IKEA's next country targets, with stores due to launch there in two to four years, while Japan has a "huge potential" beyond its two outlets today, Dahlvig said.

He expects Asia ultimately to make up a larger amount of sales than the 3-5 percent it does now, though IKEA has no timetable to launch in India, having not even begun talks with the local partners needed to enter the fast-growing market.

"We will be there eventually, I'm sure. It is a question of how and when. I think it will mostly depend on things like legislation and infrastructure development," Dahlvig said.

More advanced are plans to build a "good global model" for Internet business so that online eventually accounts for up to 20 percent of total sales, up from almost nothing now.

IKEA's sparse, flat-packed furniture has made its secretive, 80-year old founder Kamprad the world's fourth-richest man, with an estimated $28 billion fortune, Forbes magazine said last year.

Its convoluted ownership structure through a not-for-profit foundation giving the owners a low tax burden has brought criticism from The Economist and blogs.

However, at a time when many global retailers are attracting interest from private equity and changing ownership, Dahlvig expects no end to IKEA's private status.

"I don't see the ownership structure changing ever. It will remain a foundation the way it is," he said.

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