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can be said of the firm’s first Russian store that opened March 22, 2000, after Boris Yeltsin had resigned, but a week before Vladimir Putin was elected president for the first time, kicking
off over a decade of rapid growth that transformed the average Russian’s life. The Swedish retailer seems to have an unerring knack of catching the absolute nadir of transition economies and opening a store in the midst of political and economic chaos. Ukrainians must be excited. They got their first IKEA store in February. Another wave of IKEA openings has recently swept the region as the company starts moving into the smaller or most backward countries.
The opening of the Moscow branch was an iconic moment, on a par with the
But by 2000 the bounce-back was already under way. The 1998 financial crisis killed off what had been dubbed “the virtual economy”, where business was done through barter, and the devaluation had fairly priced the currency so everyone started using cash again. While the likes of the International Monetary Fund (IMF) were predicting a return to hyperinflation and a prolonged recession, what actually happened was a huge bounce back and Russia’s economy grew by 10% that year – a record that has never been beaten.
2000 marked the birth of Russia’s middle class and while the analysts wrung their hands in the aftermath of the 1998 meltdown, the people were out on the streets, shopping or hanging out in the numerous small cafes and restaurant that
1998 to set the business up, only a few days after the ruble crashed.
“It was a bit strange,” Dahlrgen told bne IntelliNews in March 2003 in an exclusive interview. “I was getting off the plane to launch a new business and all the other expat managers were getting on it to leave the country following the crash.”
But the company’s founder, Ingvar Kamprad, had long been committed to Russia.
“Kamprad has always wanted to have a store in Russia. He has been saying since the 1960s that Russia was a gold mine. It has the population. It has the raw materials. It has a very long tradition of appreciating quality furniture. Look at all the palaces they built in the Tsarist times. Kamprad has always wanted to come to Russia and always saw it as a major production centre of a European furniture business.”
Before the IKEA store opened the company prepared the ground with
the MEGA shopping complex where its Russian flagship store was eventually built. The shopping complex is on the Leningradsky Shosse spoke road that leads to Sheremetyevo International Airport where several huge anti-tank iron cross beams stand in the middle of the road like giant jacks that mark the closest the Nazi forces got to Moscow in WWII.
The MEGA shopping mall became home to several other leading retail chains, including the French supermarket chain Auchan and its biggest Russian store,
so the parking lot in the centre of the complex was always full at the weekends.
Opening day
The opening day of IKEA was a media circus. Crowds thronged into the store that looked like some wonderland of Western goods at affordable prices and happily wound their way through the interminable labyrinth of impossibly named throw cushions, snap-close picture frames and elegantly designed kitchenware. Within a few months middle-class apartments across the capital looked like miniature copies
of the IKEA showroom.
“2000 marked the birth of Russia’s middle class and while the analysts wrung their hands in the aftermath of the 1998 meltdown, the people were shopping or hanging out in the new cafes and restaurants”
first McDonalds that opened on Pushkin Square in the heart of Moscow in the dying days of the Soviet Union. (These massive Western multinationals have
to move into these markets early, as they are there for the long term and the earlier they arrive the larger the market share they can easily capture.)
In March 2000 the chaos of Yeltsin’s
90s was about to end. The legendary president had resigned on New Year’s Eve a few months earlier and the country was about to vote in Vladimir Putin as president the following weekend. Things were changing fast but the material improvement in the quality of life was not visible yet. The economy had collapsed in 1998, defaulting on $40bn worth of the now infamous GKO bonds, and the ruble had devalued by three quarters overnight. Many Russians this correspondent talked to in those days wanted to leave for good.
sprung up like mushrooms. Over the next eight years wages rose by about 10% a year as the government specifically tried to close the income gap between the public and the private sector.
Putin called on the elite to close the gap and “catch up with Portugal”, then the poorest of the EU states. The economy more than doubled in size in the next decade. Putin’s early successes have often been credited to the rise in oil prices from the 1998 crisis low of $15 per barrel, but oil prices didn't start to climb until about 2003, when they eventually soared to a peak of $150. What drove the boom in the early days was simply putting cash back in the system.
In retrospect, the decision to launch IKEA in 2000 looks inspired. In fact it was just good luck. Lennart Dahlrgen was the general manager of IKEA’s Moscow store who arrived in August
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