Ikea’s meatballs in Chile rival their furniture

Rather than going for furniture or decorative objects at the new stores that the Swedish firm Ikea opened a year ago in Chile, today the main plan of those who live in the country’s capital, Santiago, is to go eat meatballs. The modest price of the plate of meat balls, accompanied by mashed potatoes and blueberry jam—about 5.6 dollars (5.2 euros)—has conquered palates among diners in the South American country. In its first year of activity in the local market, Ikea has sold 1.5 million meat or vegan meatballs.

The arrival of the multinational to Chile, the first in South America, was eagerly awaited by consumers in that country. So much so that on August 10, 2022, the day of its inauguration, the line of people who wanted to enter to see the news of the Swedish store formed at dawn and at noon it already went around several nearby streets. However, the disembarkation has not been so easy. The first months were marked by the slowness of shipments through its electronic sales channel and by the lack of stock of some products.

It turns out that neither the Swedes nor the Chileans at Falabella, the retail giant that owns the Nordic group’s franchise in the South American market, were prepared for the enormous online demand generated by the premiere in Chile, which even surpassed that which the company has in the United States. This was confirmed to the local press by the manager in charge of the business in South America, Francisco Irarrázaval: “We have 50% more penetration of the e-commerce than the rest of the world, which are developed countries. We did not expect to have a greater penetration than the United States and somewhat less than the United Kingdom, where the use of electronic commerce is very high.”

The products most sought after by Chilean consumers—in addition to meatballs—are the lines of bedroom furniture and iconic desk furniture known as Kallax and Billy.

Visits to the Ikea store are mainly concentrated on weekends. And it’s quite a plan for the family. People stay on average three hours in the store, one hour in the exhibition area, another in the restaurant and then one more hour in the eco-home area. Of course, according to the figures, rather than buying locally, the Chilean consumer has preferred the company’s website.

Consumption weakness

However, although demand for products has increased, projected sales in the South American country are still slower than expected. There is no official information about this from the company, but the consolidated numbers of Falabella’s home renovation area, which includes Ikea, reflect it. During the first half of the year, revenue in this category fell 23%. The reason is how low consumption has been in Chile after the boom experienced between 2021 and part of 2022 as a result of the withdrawals of provident funds approved by Congress, within the framework of the measures adopted to help families in the midst of covid-19.

Furthermore, Ikea’s prices in the Chilean market have not been as competitive as they promised. And, in the midst of current economic uncertainty—Chile could see a 0.5% drop in GDP or suffer stagnation this year according to Central Bank projections—families are opting for essential products. Now Ikea’s challenge is to conquer Colombia, where the Swede plans to open its third store in South America during the second half of 2023.

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