IKEA shifts to smaller city-center stores amid slowing earnings, parental leave controversy

Interior view of the IKEA store at Hyundai Premium Outlets Songdo. [IKEA Korea]

IKEA, which made a splash in South Korea with its sprawling warehouse stores, is rethinking its retail strategy. The Swedish furniture giant is moving from suburban big-box locations into urban shopping malls, accelerating efforts to reach more customers. The industry is watching closely to see whether IKEA Korea can reverse its fortunes — battered by labor disputes and weakening earnings — through this new approach.

From warehouse to city center: IKEA rewrites its store playbook

IKEA Korea opened its first Incheon location, IKEA Hyundai Premium Outlets Songdo, at Hyundai Premium Outlets Songdo on Thursday. The Songdo store is the company's second urban-format location in South Korea.

When IKEA launched its first Korean store in Gwangmyeong in 2014, it led with a destination-shopping model built around vast showrooms and warehouses on large suburban sites. In recent years, however, the company has been pivoting toward smaller city-center stores to keep pace with shifting consumer habits.

The Songdo store covers about 600 square meters — far smaller than existing suburban locations. The format packs showrooms replicating real living spaces — a living room, bedroom, kitchen and children's area — alongside home-furnishing consultations and planning services into a single space. Customers can browse layout ideas, get expert advice and then place orders for the products they want.

About 500 home-furnishing accessories and small furniture items are available for immediate in-store purchase. The full IKEA range, including large furniture, can be ordered through digital solutions and delivered to any address. Each product carries a QR code so shoppers can compare colors and configurations, and in-store kiosks allow product searches and orders on the spot.

The shopping experience has been enhanced as well. A Swedish Food Market selling Swedish grocery items operates inside the store. The space is designed not merely as a place to buy furniture but as an environment where customers can immerse themselves in the IKEA brand.

The shift reflects a broader trend sweeping the furniture industry. Where consumers once made day-long trips to large out-of-town stores, the rise of online ordering and home delivery has elevated the appeal of conveniently located urban outlets. Browsing a showroom, consulting a specialist and then ordering online has become an established consumer pattern.

IKEA plans to keep expanding its urban footprint in line with that trend. Following Songdo, the company will open additional city-center stores in Daegu and Daejeon by 2027. Each will be under 1,000 square meters inside a mixed-use shopping complex, making it easier for customers to experience IKEA within their own neighborhoods.

IKEA Korea struggles at home

Industry observers see the urban store push as more than routine expansion — they view it as a strategic pivot to counter slowing earnings. By building lower-investment city-center footholds rather than large warehouse stores, IKEA Korea aims to broaden its consumer reach and strengthen an online-offline strategy that pairs in-store browsing with online ordering and Saturday delivery.

IKEA Korea's profitability has been on a downward trend. According to filings on the Financial Supervisory Service's DART system, sales for the last fiscal year (September 2024 to August 2025) rose 2.2 percent year on year to 639.3 billion won ($435 million), but operating profit fell 41.6 percent to 10.9 billion won. Net profit for the period also dropped 40 percent to 3.3 billion won.

IKEA Korea has also been embroiled in a parental leave demotion controversy. Allegations surfaced July 11 that an employee who returned from parental leave was demoted and pressured to resign, triggering a public backlash. President Lee Jae-myung weighed in personally, ordering a firm response and saying "outdated management practices cannot be tolerated."

IKEA Korea said the organizational restructuring was "not a measure applied only in Korea but a global reorganization." The company added that the personnel change was not directed at any specific individual, that the employee in question continues to hold the same position and duties, and that the employment relationship has not changed.

IKEA Korea also said it "is cooperating fully with the ongoing regulatory process" and pledged to "continue working to create an environment where all employees are treated with respect and can work fairly, regardless of their family circumstances."

boo@heraldcorp.com