South Korea’s home furnishing market has grown rapidly in recent years as Koreans begin to renovate and decorate their aging homes, but there’s another reason for this year’s growth -- the local opening of Swedish furniture giant Ikea.

Industry insiders said the arrival of Ikea acted as a major driver for the local furniture firms to overhaul their business strategies, including distribution and online channel expansions, as well as cost-cutting efforts to sharpen their competitive edge over the strong rival that appeals to the young consumers with Scandinavian design and affordable prices.

“(Ikea’s store launch) led to increased consumer interest toward the home interior market. The overall furniture market size has been expanded as local firms strengthen their online channels,” said Song Ji-hyun, an official at the country’s No. 1 furniture company Hanssem.

A surge in the number of single-person households here coupled with high demands for home decor have helped the Swedish low-price, build-it-yourself furniture-maker to hold the No. 3 position in the Korean market just one year since its arrival in December 2014. 

According to Ikea, more than 6.7 million people have visited its first store in Gwangmyeong, Gyeonggi Province, and it raked in some 308 billion won ($261 million) in sales over the past 12 months, much more than expected.

It was a good year for local furniture brands, too. The five leading domestic furniture companies – Hanssem, Hyundai Livart, ENEX, Fursys and Ace Bed -- are expected to post combined sales of 3.1 trillion won, up 20 percent from a year earlier.

Hanssem, in particular, posted 31.2 percent on-year sales growth in the first nine months this year.

In the face of heating competition, Hanssem scurried to open more outlets in a bid to strengthen face-to-face relations with customers.

In August, Hanssem opened a 9,240-square-meter showroom in Daegu -- still much smaller than Ikea’s 59,000-square-meter Gwangmyeong outlet, but the brand’s largest store.

Hyundai Livart has expanded the number of its main stores from six to eight since Ikea entered the Korean market, while ENEX introduced cost-saving measures to save 2.5 billion won annually.

“Korean consumers seldom visited furniture stores except for moving season. With Ikea’s Korea entrance, consumers’ awareness of home furnishings has heightened, as Ikea offers not only pieces of furniture, but also homeware products at affordable prices,” an Ikea official said.

To counter Ikea, local rivals are placing more weight on furnishings and household goods, increasing the number of such items to 40 percent of all stock they sell from the previous 10-20 percent.

According to Statistics Korea, the country’s home furnishings market was valued at 12.5 trillion won in 2014, and is projected to rise to 13.5 trillion won by 2018.

As the industry game-changer Ikea announced Wednesday that it would invest 1.2 trillion won to build five more stores in Korea by 2020, competition is expected to become even fiercer.

“Local furniture companies achieved encouraging results by putting much efforts to strengthen their foothold and catch up with the latest trends this year. But in coming years it will be difficult for them to keep their dominant position with their distribution network, as Ikea plans to aggressively expand its presence,” an industry insider said. 

By Park Han-na (hnpark@heraldcorp.com)