Inside Ikea

 

IKEAIkea’s Kungens Kurva flagship in Stockholm, Sweden stands at 63,000sqm and is unlike any other Ikea store in the world.

Spread over four levels and two interconnecting buildings, the store is almost three times the size of an average Ikea and makes  €2.1 billion (A$2.95 billion) per year, an incredible sum, and yet there’s still more work to be done.

This year’s Westfield World Retail Study Tour visited the furniture and homewares goliath’s largest store to date, in terms of both scale and sales.

The store is one of two in Stockholm, situated on the outskirts of city’s CBD. Kungens Kurva trades seven days a week, 365 days a year, handles 1000 units of incoming goods daily, and employs 950 staff.

First built in 1965 and modelled off the spiral design of New York’s Guggenheim Museum, the then 31,000sqm store was the second Ikea store to open in Stockholm and the largest.

In 1970 the store was damaged by a fire and subsequently closed for repairs. One year later it store reopened, and having expanded during reconstruction, was unable to keep up with customer demand.

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The influx of shoppers led to the furniture retail to experiment with a new concept. Ikea decided to open its warehouse for customers to pick up their own furniture. This move would unknowing lead the retailer to create its now trademark self service model.

“Since then we have had self service at the heart of the retail concept and retail idea,” Freddy Johansson, store manager of Ikea Kungens Kurva, told Westfield Study Tour participants touring the flagship.

“Sometimes you need to be lucky, and I think we were in 1971 when the self service concept and our flatpacks became a big part of Ikea. We wouldn’t be able to survive without it today,” Johansson said.

The store underwent its second major refurb in 2002, and earlier this year opened a 8000sqm external warehouse on the site to handle the capacity.

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“Our challenge is to keep focused on the consumer. We’re investing kr 200 million SEK to kr 300 million SEK Swedish Krona in the coming three years for property work and also to make it a little bit more modern than we are today.”

Despite its mammoth size, delegates were surprised to hear that there’s just over 9000 SKUs instore, with the bulk of the footprint taken up by a myriad of room designs, which display complete settings using stock from a range of its departments.

The store hosts up to 22,000 customers per day, with up to 25,000 people passing through on public holidays and weekends.

Tour participants were bewildered at the volume of food consumed each day by customers at the store’s cafe, including 2500 main courses, 3500 hot dogs, and 2000 slices of pizza.

Globally, Ikea has 300 company-owned stores and around 60 franchised outlets worldwide. It operates in 43 countries and turned over €28 billion in sales last financial year.

Local presence

Ikea first opened in Australia more than 30 years ago. Its rollout has been slow and steady to say the least, with only five wholly owned stores – two in Melbourne, two in Sydney, and one in Brisbane, with another two franchised stores in Perth and Adelaide.

 

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The furniture and homewares giant plans to open four new stores over the next two years, with a long term target of 14 stores for the Australian market. Locally, its stores sit from 25,000sqm to up to 38,000sqm.

Over the past 12 months, Asia and North America have become strong growth areas, with Ikea planning to open two additional stores in China this financial year.

It has also earmarked India as its next market having recently received planning approval.

“It’s been a struggle to get things going there with production and logistics and stuff like that, but we have strong expansion plans for China and also India.

“It’s amazing what a main attraction it is in China – there were 43,000 visitors on the first day in Chongqing [March 2014], so of course we need to continue that expansion in China.”

Since 2003, Ikea has tripled its turnover globally, however, growth in its home market has lacked in more recent years.

“That is an amazing speed, but we will also look into the plans to continue. Sweden is increasing, but a bit slower than what we want it to be.”

Ikea’s e-commerce rollout has also been slow compared to most global retail chains, selling online in only 13 countries. It will accelerate its online presence with a launch in three new markets this year.

“We are already a bit behind in e-commerce, but we are catching and I can see that with the right logistical set up we can be a really strong player in e-commerce market.

“We’ve got e-commerce in three new markets this year, and we’re going to be very aggressive in Sweden and some other countries.”

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Green is good

While the retailer has aggressive plans to expand, it also wary of its carbon footprint, with plans for its Swedish operations to be carbon neutral by 2016.

“In Sweden in two years from now we’ll be carbon neutral. All units, stores, and offices will be 100 per cent done ourselves,” he said.

“Today we have 60 per cent of our production in Europe. Since I was in development 15 years ago everything was moving to China, but there’s since been a big change and we now we need to be much closer to the final destination.

“It’s too expensive to have everything in the one place. Every store in every market is a complete different strategy.”

A major focus has also been on LED lighting. By 2016, the retailer plans to have LED lighting across all stores and as have more than 22 million LED products.

“We will start to sell solar panels soon and we’re also going to try that in the UK depending on regulations,” Johansson said.

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To reserve a place on Westfield’s Asian Express Retail Study Tour next month taking in Shanghai, Hong Kong, Macau, and Singapore, contact Robyn Burgess, [email protected].

To attend Westfield’s annual Breakfast Seminar Series in Adelaide, Perth, Brisbane, Melbourne, or Sydney, click here.

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