Will NZ's new Ikea be part of the Swedish retailer's plan to downsize?

Wednesday, 9 January 2019

Now that Ikea's arrival has been confirmed by the Swedish homeware retailer the big question on everyone's mind is where will it go?

Could it be a shopping destination on the outskirts of our biggest city, or will it be part of Ikea's new plan of opening smaller stores that could even fit into shopping malls?

First Retail Group managing director Chris Wilkinson said he had no doubt the store would be in Auckland.

But will it be a mega-store?

'Scale is what sets Ikea apart from other retailers. But nothing is off the table because New Zealand is an ideal trial market for international retailers to trial out concepts because of its concentrated audience and mixed demographic,' Wilkinson said.

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Wilkinson said in recent years Ikea has opened stores in three different store formats, that complemented each other.

Late last year Ikea announced it had 30 new small stores planned around the world to adapt to changing shopping habits.

There is the classic, big box, mega-store at the edge of a major city, normally 34,000 square metres, with the entire range, big showroom floors with the products displayed in mock bedrooms and bathrooms, for example. The mega-stores include everything from homeware to groceries and even a cafeteria with the famed meatballs and lox (smoked salmon for us Kiwis).

There is the mid-range store like this one in Poland, that was just 5,000sqm and opened in November last year. No iconic Swedish meatballs served here but consumers can walk in, design their ideal their rooms and place an order to have products be shipped to them.

And then (will this be us?) a mini click-and-collect store like the 900sqm store in a Westfield mall in Stratford City in the UK where you can order the full range and pick-up. But that's it.

The mid-range, and smaller click-and-collect stores, are an attempt by Ikea to catchup to e-commerce by offering convenience to city and apartment dwellers.

Wilkinson said it was possible a smaller store would go into Newmarket's new Westfield development, where Auckland's first David Jones store will be opening. 

'Consumers are increasingly mixing brands luxury with high street, so it won't be a surprise if an Ikea goes in the same mall as a luxury store like David Jones.

'It's common in malls around the world where you get the high end brands on the top and your cheaper brands at the bottom.'

If Ikea was planning to go all out and bring in their iconic megastore, then Drury would be ideal, Wilkinson said.

'A big site will have to be one of the newer developments near Auckland. Drury would provide Ikea with the largest population, because it would make it a destination for consumers in Auckland, the Waikato and the Bay of Plenty,' he said.

Auckland Chamber of Commerce chief executive Michael Barnett said Ikea's arrival was good news for the country, with it brining a new range of products, pricing and competition to the market.

'It's a good thing for New Zealand. Yes it'll put pressure on the smaller retailers, but when Bunnings and Mitre 10 started out they put pressure on existing players, it's the new way - to have a megastore and sell products at a cheaper price,' Barnett said.

'It's good news for the DIY guy, for students, and it will create more jobs in construction and retail.'

Barnett also said it was likely the first store would be in central Auckland, due to its diverse and large population. 

Westgate in west Auckland, a new town centre within range of 20,000 to 30,000 new houses, is also a possibility he said. 

Aucklander Allicia​ William said she would like the new store to be near Sylvia Park, but Wilkinson ruled this out because of the size constraints.

'What makes Ikea special is its size and that it's a destination in its own right.'

Ikea is in 54 countries, and in 2017 made €38.8 billion (NZ$64b) in retail sales.

Kiwis have waited for years for Ikea's arrival, and more than 19,000 people like a Facebook page 'bring Ikea to New Zealand'.

In December Ikea said it would work with a company called Ingka Group to open its New Zealand stores.

'We are happy to meet the wish from many people for Ikea to open in New Zealand and we aim to make Ikea fully accessible, including stores and e-commerce,' said Tolga Oncu, retail operations manager, Ingka Group.

'We see this as a long-term commitment and investment in New Zealand, building relationships with customers, suppliers and future co-workers.'