Cooperation, Estonia, Lithuania, Markets and Companies, Retail, Woodwork

Although Estonians like to talk about the importance of having strong customers to boost exports and review the economy, this is not clearly the case with IKEA, LETA writes.

"One reason is that the Lithuanian cost basis is different, but Lithuanians are also able to think bigger than Estonians. After all, they had a king, they are Catholics, an entirely different mentality and larger plants already from the Soviet times," says Priit Tamm, one of shareholders and marketing manager of Estonia's largest office furniture maker Standard.

"I think that the IKEA train has gone forever for Estonia," says Tamm who is also head of the Estonian association of furniture makers.

Dalius Simenas, the Chief Analyst of Invest Lithuania, says that IKEA's importance to the Lithuanian furniture industry is immense.

"Before the crisis furniture makers earned two-thirds of their export income through IKEA. This trend has continued also in the first half of this year," Simenas states.

According to Simenas, such exports help manufacturers to cover domestic losses.

"At tough times cheap good-quality furniture is especially attractive for consumers both in Europea and North America. Lithuania has tens of furniture makers who have grown with the help of IKEA," Simenas adds.

Statistics upholds this view. In the last five years, Lithuanian exports of furniture and interior decoration goods has increased 11 percent, while Estonia's figure is up only four percent and Latvia's figure down three percent. During the crisis, furniture exports fell 15 percent in Lithuania, 18 percent - in Estonia and 33 percent - in Latvia.

Tamm says that six-seven years ago Estonian furniture industry was supplying IKEA, but when the customer decided to move production to cheaper countries, local furniture producers decided to look for other customers and develop their own brands.

According to Tamm, to supply IKEA in the Baltics means that the company basically works only for IKEA, adopts its new business plan structure and business philosophy to reflect the IKEA value.

"Once IKEA signs you as a supplier, you will have huge volumes, but they must be well managed," Tamm said.

According to him, Estonian manufacturers like to complain about IKEA's cost and price structure, but the fact is that cooperation with IKEA would have required huge investments also from the suppliers.

"IKEA is not planning to drive its subcontractors bankrupt once in every two years. It is paying by due date," he adds.

Aare Paloots, the CEO of Tarmel, says that when they were discussing possible cooperation with IKEA, the customer required lower prices every years.

"If you did not, they moved the contracts elsewhere. We made this mistake twice," he said.

One benefit that Lithuania may have is an IKEA store. Charlotte Lindgren, the press spokesperson of IKEA, told Aripaev that although the company has no plans to open a store in Estonia or Latvia in the near future, they may decide to open one in Lithuanian in three to five years.