Gigantic IKEA is opening in China

BEIJING — The restaurant at IKEA's newest store seats 700. Its lobby is a cavernous three stories high. To show off the Swedish home furnishing maker's goods, there are showrooms the size of five football fields with 77 model living rooms, kitchens and bedrooms.

The store, due to open Wednesday, is IKEA's biggest in the world after its Stockholm flagship, and shows like little else could the intense competition to cash in on China's home improvement market as millions of new homebuyers set out to decorate them.

"It is only in a store of this size that we can offer what we want to offer and to differentiate ourselves from our competitors in this changing market," said Ian Duffy, IKEA's president for Asia and the Pacific.

IKEA, Home Depot Inc. of the United States, Britain's B&Q and others are looking to China to drive sales as growth slows in the United States, Europe and other markets for furniture, appliances and other trappings of home ownership.

They stand to profit from twin trends in China, both government-supported — millions of families buying new homes and official efforts to drive economic growth by boosting consumer spending.

Estimates of the size of China's home improvement market range from $15 billion to as much as $40 billion, with growth forecast at 10 to 20 percent a year. The government says overall retail sales rose nearly 13 percent in 2005.

"The growth has been very strong between IKEA, B&Q, even local brands like Homes Orient. It's very competitive," said Anna Kalifa, head of research in Beijing for consulting firm Jones Lang LaSalle.

"Over 100 cities in China have more than 1 million people," Kalifa said. "If even a small percentage of these people are able to purchase home furnishings, it would be really promising."

The government got the trend moving in the late 1990s when, hoping to get state companies out of the business of housing their workers, it prodded families to buy homes, offering low-cost mortgages or bargain prices on older apartments.

Coupled with rising urban incomes, that set off a building boom in the late 1990s in Beijing, Shanghai and other cities, with developers putting up forests of high-rises with thousands of new apartments.

Decorating a home has become a cultural phenomenon, driving the creation of the career of Chinese interior designer and a crop of home-decor magazines with the latest in European design.