Will IKEA be good for the Philippine economy?

Filipinos are excited about news that Swedish furniture retail giant IKEA will soon be opening in the Philippines. The question is, where will IKEA be sourcing its merchandise?

“Activists” have been denouncing how China is supposedly slowly taking over the Philippine economy, yet many of these snowflakes seem to fail to realise how IKEA reportedly opening its biggest store in the world in the Philippines will, itself, be potentially flooding the Philippine market with cheap imported furniture — potentially flattening an entire domestic industry in its path.

Already, even local big retailers like the SM Group are outlets for products mostly imported from China. The entry of another big retailer will likely fatten the import pipes out of which spill the massive quantities of cheap imported goods that undercut relatively uncompetitive local producers. Interestingly, many of the shrillest “activists” also sideline as social media “influencers” who pitch imported products to a following consisting mainly of trendy middle class consumers hungry for branded imported consumer goods.

The Swedish retail behemoth setting up shop in the Philippines is, of course, a good thing. But that depends on which side of the economic equation one sits.

IKEA Southeast Asia will invest an initial P7 billion for the store, which will employ some 500 Filipinos on top of spin off jobs and other business opportunities, the company said.

The Philippines’ young population, with an average age of 24, drew IKEA to build its largest store in the country, said Georj Platzer, who will manage the facility once it’s finished.

“Also together with the developments and condominiums, residential building together with the growing middle class, it’s a fantastic future market for IKEA,” he said.

Consumption contributes a hefty share of value to the Philippine economy. However, consumption contributes very little to the expansion of the capital base of the national economy and a discount retail business such as that of IKEA, like its domestic counterparts, will likely serve as another massive conduit for the flow of imported goods into the Philippine market possibly destroying more than it actually builds.

Furniture production, for example, is one of the remaining major domestic manufacturing and export industries in the Philippines. The furniture business encompasses thousands of small businesses employing hundreds of thousands of Filipinos. It has lately been buoyed by a healthy property development market and a large base of increasingly affluent young Filipino consumers. The arrival of IKEA which, as reported, is aiming to corner the same market may emerge as the biggest threat to the local furniture industry.

That said, there is an opportunity for domestic players to step up to the possibility of supplying the new retail kid on the block. The key, of course, lies in uplifting the quality and consistency of domestic furniture manufacturing to meet the stringent specifications and quality standards of IKEA. This remains to be seen as this will likely involve investment in capability to mass-produce furniture with very precisely-engineered parts. Because IKEA furniture is usually sold disassembled and flat-packed and transported, moved, and stored in bulk, Filipino furniture manufacturers will need to further industrialise to meet the economies of scale and efficiencies required to compete with IKEA’s formidable portfolio of global suppliers.

This is the challenge at the other end of the retail and consumption equation. IKEA will be a boon to Filipino consumers. The million dollar question is, are Filipino producers up to the challenge of seizing otherwise abundant opportunities on the supply side?

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11 Comments on “Will IKEA be good for the Philippine economy?”

  1. Our local furniture industry will surely be affected. But wait, most locally made furniture are poor imitations of Ikea and the like anyway but at ridiculous prices. The caveat is you might end up buying furniture that is made of Falcata or G-melina wood. There are no standard measurements to speak of unless it is made to order. Hopefully Ikea can change all these and local furniture manufacturers will accept the challenge.

  2. lol, i see a market for “ikea product construction services” (labor like TaskRabbit)
    you see, the ph isnt a DIY culture, so most would probably buy the disassembled package and hire a “bhoy” to put it together for them. Also most “bhoys” wouldnt care to read the manual as well, because pinoys love macguyvering a “pwede na” finished product, so were gonna see a lot of shitty builds. On the bright side, those who actually like building stuff can replicate stuff found on ikeahacks, or better yet, come up with new ones.

  3. IKEA can sell local products. Furniture manufacturers, and other local manufacturers, can use IKEA as their retailer or wholesaler. It is an opportunity for furniture manufacturers, to improve their designs; do a good Quality Control and Quality Assurance in their manufacturing methods; to be competitive in world’s market.

    IKEA can introduce Philippine products to the world. Since, it is a world known retailer and wholesaler . We can compete with Chinese products, if we can just improve our manufacturing systems.

  4. I have been to my local IKEA outlet once. And it was a disaster. If you are looking for a product X, which is displayed somewhere in the beginning of the store, you cant walk back the way you came to leave the store. You have to walk through and till the end. No escape to leave the store halfway. Boy, you dont want to be found dead in an IKEA store. For me, it is never again.

  5. PHILIPPINES NEED IKEA … to bring down non-performing dowdy-design furnitures to replace it with minimalist assembly-required furnitures. The assembly requires IQ. Only people with minimum of 70 IQ points are required to assemble Ikea furnitures that means only very few Filipinos will buy Ikea.

    1. IKEA IS GOOD. It may not be sturdy. Favorite of students. It is inexpensive. When I moved from dorm to dorm I just leave these Ikea furnitures … if not, fold and trash … it doesn’t hurt the pocket … it is cheap … so are its materials. ONE THING I LIKE ABOUT IKEA is its designs. Truly Nazi-inspired.

    2. I strongly agree on this, because I live abroad and there is an IKEA here, and most pinoys wont simply be bothered to build the furniture themselves. Instead, for a small price, ask the delivery people or someone they know who has “minimal carpentry skills” to build it for them. And boy, a lot of those who try to build it themselves just ignore the manual, ending up with a product that was probably disassembled and reassembled at least 3 times because they forgot a part or the wrong screw was used.

  6. Only while sleeping one makes no mistakes. Making mistakes is the privilege of the active — of those who can correct their mistakes and put them right.

  7. FILIPINOS HAVE NO ART SENSE. What they have are COMMON SINS !!!

    I’ve hopscotch around South East Asia from Cambodia to Laos to Thailand and Vietnam. What I discovered they have a sense of art. Walking the sidewalks of Luang Prabang mesmerized me in comparison to Philippines. THEIR SIDEWALKS ARE BRICKS !!! THEY HAVE DESIGNS !!! Rectangle. Square. Hexagonal. And wider sidewalks, too !!!

    In the Philippines, they pour cement on the sidewalk and that is it !!! DONE !!! FINITO !!! Artless. Boring. Lazy.

    Buildings along Makati Ave are designed by foreigners not by locals. It is easy to spot buildings designed by locals. Bridges, those long-span bridges, are designed by foreigners.

    IKEA will give foreigners in the Philippines 1stWorld designed furnitures albeit rickety. IKEA furnitures are not for keeps but to be discarded once foreigners move. It mostly caters to students-in-dorm.

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