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. Last Updated: 07/27/2016

IKEA Upbeat After 10 Years of Problems

But managers say they are still waiting for a store in Samara to open before they consider any new investments in Russia.

IKEA officials put a bright face on what have been an occasionally rocky first 10 years in Russia, saying Thursday that they would continue expansion once a mall in Samara is completed and don’t regret their decision to enter the market.

“We’ve had annual sales increases of 20 percent on average since the launch of the first store in 2000,” Per Kaufmann, head of IKEA Russia and CIS, said at a news conference dedicated to the anniversary. “Our business has never witnessed such sale boost anywhere in the world.”

He said the company expected to maintain the growth figure this year, despite the recession and that sales in the country now accounted for about 4 percent to 5 percent of the company’s overall volume.

But the Swedish retail giant has faced numerous obstacles to its growth from regional authorities and regulators, most recently in Samara. The company’s experience has served as a cautionary tale to others thinking of investing in Russia, although IKEA said it was heartened by improvements in recent years.

“We’re currently building a mall in Ufa, and we’re preparing for the construction of a shopping center in Mytishchi,” Kaufmann said. “We have design projects for outlets in Saratov and Voronezh ready.”

In June, Kaufmann said IKEA would halt all future investments in Russia after it was not allowed to open the Samara mall — almost two years after it was finished — because of bureaucratic barriers posed by local officials.

IKEA founder Ingvar Kamprad, ranked by Fortune magazine as the world’s fifth-richest person, said on Swedish radio that Russian power companies had cheated IKEA out of 135 million euros ($190 million) by overcharging it for electricity and gas, and he linked the problem to IKEA’s policy of not paying bribes.

But the threat to halt investment appeared to hit home, and the Economic Development Ministry said in late July that it had reached an agreement with IKEA that would allow the store to open. Kaufmann said at the time that IKEA agreed to set a schedule for resolving problems found by the government.

“The situation isn’t that bad, as we currently have 12 Mega stores operating in Russia,” said Stefan Gross, director of real estate in Russia and the CIS. “But we really expect the Samara mall to be opened before we make the next decision on further investment.”

Lennart Dahlgren, the company’s first CEO in Russia, recalled the arduous process of opening the first store.

“We first wanted to launch IKEA in Russia in the Soviet era, then we made a second attempt in 1993, but the military coup forced us to put our plans aside,” he said. “I came to make the third attempt on Aug. 17, 1998, the same day the last crash hit the Russian economy.”

Dahlgren said many of his high-ranked Western colleagues tried to talk him out of that “crazy idea” to start a business in a country with high corruption and excessive import taxes.

“Even my friend, IKEA’s legendary founder Ingvar Kamprad, was opposed to starting business there and then,” he said. “But I insisted, and we succeeded.”

In August 1999, Vladimir Putin — shortly after starting his first stint as prime minister — signed an order decreasing import duties, which allowed the company to launch its business, Dahlgren said.

On March 26, 2000, IKEA inaugurated its first mall in Khimki, just outside of Moscow, and 40,000 people visited it.

“I remember that day, Ingvar Kamprad was almost crying of joy,” he said. “On the second day, we decided to build more stores and hire more people, so this is how we came to where we are today.”

The company also faced some of its great challenges opening the Khimki mall, as the local authorities posed serious obstacles. Dahlgren said the Russian media played a decisive role in overcoming the situation.

“That was a surprise to me, that the media stood as the one opposing the authorities,” he said. “Soon, the Moscow region governor, unwilling to see the scandal get any bigger, had to write to the mayor of Khimki and order him to allow the opening.”

But for all the reminiscing of good times and bad, the executives were decidedly upbeat about IKEA’s next 10 years in Russia.

“I have noticed considerable differences during the three years I have been here,” Kaufmann said. “Russia is starting to obey the laws, which brings transparency and benefits foreign business working here.”