What Kazakhstani companies do to substitute products from IKEA

Business is trying to reorganize its operations
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Until February many Kazakhstani shops were filled with furniture and consumer goods from IKEA. Currently, Russian producers are going to substitute those goods from Sweden

In the past several years, companies that specialize in delivering goods from IKEA shops in Russia to Kazakhstan, where IKEA has no official shops, became so popular that these companies started to open big shops where every product they sell was from IKEA. On March 4, IKEA suspended the work of its shops in Russia because of the Russian invasion of Ukraine. As a result, Kazakhstani businesses that brought IKEA products to Kazakhstan from Novosibirsk, Omsk, Ufa and Samara now have to find alternative sources of similar goods.

In fact, Kazakhstani services that deliver IKEA goods stopped accepting orders right after the Swedish company announced the suspension of operation in Russia.

However, many of those online shops are still working as they try to sell off leftovers from their warehouses. “The suspension has primarily hit small and middle-sized businesses,” said Anastasiya Mustafayeva, executive in My Home.

Mebelik, Vash Dom, LBstore, Idea.Almaty and many other shops have also put themselves in a waiting mode. They are waiting for the reopening of IKEA in Russia. As Mustafayeva noted, she is going to stick to the IKEA brand because any transition to a new brand is time-consuming and would require a lot of investments.

Nature abhors a vacuum

Big offline shops that used to be filled with various IKEA products are trying to substitute goods that have gone with products supplied by Russian companies. Often, these are goods from the Russian chains Hoff and Sima-Land, which is one of the biggest wholesale companies in Russia; it sells almost everything, including goods for homes and offices.

“We’ve started to work with new suppliers, for example, Sima-Land. This company has quite a big assortment and some unique products you won’t find in IKEA,” said Damir Dyusenbayev, head of the shop called Stockholm in Nur-Sultan.

Just a while ago, the shop was full of IKEA products (90% of its assortment) and as Dyusenbayev noted, it was scary to switch to another supplier. Consumers continue to buy but they probably come to the shop just because of a lack of alternatives, he said.

As Stockholm representatives noted, despite the vast majority of those new items often having lower quality, some of them are quite good.

Another shop in Nur-Sultan Swedea is trying its best in creating an exhibit rack like IKEA does in its official shops. According to Bekmurza Baltabekov, executive director of Swedea, the shop is negotiating with Sima-Land and Hoff and has already brought some products to Kazakhstan. The quality of Hoff and IKEA is different though, he said.

“The key disadvantage for us is prices surge. When IKEA closed its shop all furniture in Russia become twice as expensive. It’s very expensive for Kazakhstan. People are ready to pay for IKEA because they like its quality and design, but they won’t pay the same price for something lower in quality,” Baltabekov said.

Currently, Swedea reports a fourfold plunge in sales and the low quality of new products isn’t the only reason for this. The vast majority of Kazakhstani consumers have little to no notion about new Russian brands and show some caution toward their products. As a result, the shop is going to promote these new brands on the local market.

Concerning local brands, owners of shops are decisive: there are no strong players in Kazakhstan who can substitute IKEA. On the other hand, there is Paterson, a local brand that has been able to fill empty shelves of local shops with Kazakhstani brands Arua and Suave. These two labels belong to AGF Group from Shymkent which supplied bedsheets for IKEA shops in Russia.

Keep a foot in both camps

“We thought about Turkey and China as possible sources of assortment, but in this case, we would have to wait about a month. We can’t afford to freeze money for a month. We have to pay our employees and landlord. Moreover, in this case, we would have been forced to raise prices. It is not a good idea in any case because, at the end of the day, IKEA is about middle-class consumers,” said Baltabekov.

In turn, Stockholm confirms that the shop is ready to continue with IKEA outside of Russia, but only if the company decides to leave the Russian market once and for all. So far, the company hopes that the Swedish producer will return to Russia soon.

Some big players, including Home Love (or Uyut) have already started to test alternative routes for IKEA deliveries.

The company refused to give an official comment but people familiar with the matter told the Kursiv edition that the company is waiting for the first shipment from Poland in the middle of May. According to the shop representative, they used to wait about two weeks for delivery from Novosibirsk and have no idea how much time the new route from Poland would take. There are no goods by any other brand in the shop.

“If you are going to buy something in IKEA you better do it now,” a consultant was very kind to advise. “First of all, any next shipment will take time and second, it is going to be much more expensive,” he added.

Swedish Almaty is located on the semi-basement floor of the Zhibek Zholy trading center. Almost everything here including the customer journey map resembles the Swedish brand. Due to the situation, the shop is filling its shelves with Russian furniture by Hoff.

“There are products from IKEA and Hoff only; we do not plan to sell products from any other brands. Concerning dates for another shipment from IKEA, I have no idea. We are going to order goods in China and Turkey, but negotiations haven’t been finished yet,” said a consultant in the shop. He also confirmed that the shop has lost some of its clients because of worsened assortment.

In the textile department, a consultant said that they are trying to sell leftovers brought from Russia. In May they are going to receive a test shipment of goods from Turkey. The company’s management hasn’t responded to a request by Kursiv.

Another quite big shop in Almaty HomeArt said that Turkey is the most preferable for them as an alternative source of IKEA goods. “Currently, we are waiting for a small shipment of goods (without furniture). There are two routes – land-based by vehicles and a route via the Caspian Sea. The second one is slightly cheaper but both are going to take about a month or longer. We are going to see which option will be more effective,” the company said.

HomeArt management noted that prices for IKEA products will increase but they do not know how far this process is going to go. “IKEA hasn’t revealed its final prices, so we can’t forecast anything in this term. During the past five months, we bought products from Russia and throughout that time prices changed several times with an increase of about 50%.”

The company is not going to negotiate with other brands because IKEA hasn’t left the Russian market. “They just postponed sales, so we are in this waiting mode.”

If IKEA leaves Russia we will take relevant measures, for example, will consider alternative brands,” said HomeArt.

The vast majority of market participants believe that IKEA will stay popular in Kazakhstan, although the number of shops and brand followers will shrink because of the price surge.

However, Damir Dyusenbayev is more positive. “Things are going to be better because when IKEA is back we won’t stop cooperating with Sima-Land, Barneo or other Russian brands. One thing does not necessarily preclude the other. That means that the assortment in our shops will be bigger and this is good for consumers,” he said.

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