Ikea plans to open 17 new US locations in the next 3 years

[Brian Lutz]

https://www.ingka.com/news/ikea-retail- ... ulfilment/

Ikea has announced plans to invest $2.2 billion into the US market over the next three years with plans to open 17 new facilities (8 new full stores and 9 "plan and order" points) primarily in the Southern US. In addition to this, existing stores will be upgraded to provide more home delivery options. The long delayed San Francisco store will be opening this summer, along with another location in Arlington Virginia.

It has been suggested that the US may prove a more suitable market for growth than some other global markets, and Ikea does seem to be able to increase sales in the US even in current economic conditions.

[storewanderer]

If they can defy logic and their new store in San Francisco can be a roaring success, it will give them something good to build from.

I think they have opportunities in a lot of medium sized markets. They need a smaller box. They can take significant share from Target.

[Brian Lutz]

A few more details on the Arlington VA store, it will be another Plan and Order point located in the Pentagon City shopping center:

https://www.arlnow.com/2023/03/22/just- ... agon-city/

The store will be only 5,012 square feet, and no physical items will be sold in the store The article states that the store is located to attract customers that travel by public transit who would be unable to easily reach the other two Ikea stores in the metro area.

[babs]

If they can defy logic and their new store in San Francisco can be a roaring success, it will give them something good to build from.

I think they have opportunities in a lot of medium sized markets. They need a smaller box. They can take significant share from Target.

Many of Ikea's current markets can take multiple stores. Ikea for years has talked about a store in one of the Northern Seattle suburbs. Portland could support a second store south of the city in the Wilsonville area. This is a chain that is nowhere near saturating the US market.

[Brian Lutz]

If Ikea wanted to build a full size store north of Seattle I suspect they'd have to go a fair bit north of Seattle proper just to find enough land for it. Quil Ceda Village (near the Tulalip Casino) might be a possible candidate, but I don't know if there are any big enough lots available there. Beyond that the best candidate would probably be the Smokey Point area in Arlington, since there's at least a semi-decent amount of land, easy access to I-5 and a large established shopping center. I don't think attracting Canadian customers is a concern for them because there's already two full size Ikea stores and a network of pick up points in the Vancouver area, but Smokey Point and Quil Ceda Village are shopping areas that attract a fair number of cross-border shoppers.

Locating a store in the more rural part of Snohomish County might be an option too, but that would lose the easy freeway accessibility.

[buckguy]

A few more details on the Arlington VA store, it will be another Plan and Order point located in the Pentagon City shopping center:

https://www.arlnow.com/2023/03/22/just- ... agon-city/

The store will be only 5,012 square feet, and no physical items will be sold in the store The article states that the store is located to attract customers that travel by public transit who would be unable to easily reach the other two Ikea stores in the metro area.

It's not going to be in Pentagon City (a regional mall). It'll be in the enclosed big box complex across the street that's attached to Costco. They're probably taking the space that used to be a mattress store and is the first store you encounter coming from the Metro.

This is the format that flopped in NYC. There are people who go to Ikea to do a cheap kitchen renovation for a rental unit or a flip for whom this might work, but I'd imagine a lot of people want to see the furniture in person and comparison shop among items, unless they're buying a commodity items like IKea's well-liked bookcases. They'd also be missing the impulse purchases of kitchen and decor items. Their niche for city dwellers used to be filled by futon stores and chains like the Door Store or Jennifer Convertibles. Ikea offered better pricing for furniture and new mattress types made futons obsolete. A well mechandised smaller store, emphasizing living and bedroom lines along with decor items is really what they need in this location. They've have had stores tailored for city dwellers for decades in other parts of the world. The first time I ever visited an Ikea was in Hong Kong and it was like this.

[buckguy]

If they can defy logic and their new store in San Francisco can be a roaring success, it will give them something good to build from.

I think they have opportunities in a lot of medium sized markets. They need a smaller box. They can take significant share from Target.

Ikea stores are huge regional draws---the Atlanta store had license plates from Alabama, Tennessee, North Carolina, etc. making up at least a third of the customers. The one in Pittsburgh draws from all over NE Ohio, which is why they planned one near Cleveland before they paused opening big stores.

A lot of their customers won't be satisfied with smaller stores---they'd just trek 100-150 miles to a bigger store. Ikea is a true destination store and it took them awhile to open stores that weren't part of an existing big complex like Plymouth Meeting Mall (where the first East Coast store opened on an outlot). The volume customers for them are people setting up their first house or apartment without too many hand me downs. They're especially popular with foreign grad students and trainees, which means it helps to be in a big Metro where there's turnover in this demographic. Their trade in cheap kitchen renovations, guest rooms, kids' bedrooms and items like bookcases wouldn't create enough volume for a small format in a medium market. They may be able to make a smaller format work in a city or inner ring location, with the right merchandising, as they do outside the US.

[ClownLoach]

I believe they said they are doing only 8 full size new stores and the rest are the small format showrooms. They are still tweaking that format but if done correctly it could be of some value to their customers. If they're willing to deliver to this pickup point location at no charge then some customers may be more inclined to purchase from Ikea as they could go to the large store with showroom and do all their planning work, then order for pickup at the closer location.

I have a increasing appreciation for Ikea as they were the only furniture store that didn't double or triple their prices in the last few years. Their flat pack winds up saving them a fortune in shipping which gets passed on to you. I saw a couch set that Costco sold in 2019 for $699 priced at $1439 last year, and they had trimmed the width and armrests to reduce the packaging size. A large sectional that used to be $1999 in leather is now $2999 in cheap feeling fabric "after $500 savings." Costco seems to have given up on furniture as they ordered very little this year; they usually do a furniture event in January and July to fill space.

Back to Ikea, items we bought 7 to 10 years ago for several hundred dollars are only $20-$50 more today. And they have a wide variety of quality in most categories; yes you can get a really cheap crappy couch for $300 but you can get some around $900 that compare favorably to $1500+ models elsewhere. That couch came in 4 different flat boxes and it has to be assembled but it was easy to do (certainly easier than building a bookcase). I got a hide-a-bed couch for $949 that is superior in every way to models that cost $1500+ elsewhere. And there is a lot of Ikea-hacking possible. I got two new dressers recently; absolutely loved the dresser itself but hated the drawer pulls. This was an easy fix; about $22 at Home Depot and it was transformed into a great looking piece of furniture nobody would guess came from Ikea. Their low end items are probably still better quality than Walmart furniture.

Where Ikea fails is their limited delivery options for larger items. They drop off the boxes outside your house (they can be really heavy) and don't assemble. If you want it brought in the house that's an extra charge, and if you want it assembled you add another charge on top of that for a possibly questionable gig worker from TaskRabbit (their subsidiary). They clearly don't want to take on the expense and liability of proper furniture delivery. Hence the value for a pickup point store. It's something uniquely valuable to Ikea and really almost nobody else. Also their stores are not exactly the easiest place to figure out either; they have moved towards "see associate" tags for more complicated items versus just giving you the warehouse location in an effort to improve customer satisfaction and reduce costly returns. So again these small stores if located properly could be very helpful to the customer who might be confused by the website in more complicated "customized items" like bookcases where there are thousands of combinations of doors, shelves, panels, legs etc.

[storewanderer]

Ikea will reach far more customers by moving into some medium markets. Many people in Reno would shop Ikea if it were here (in some form). Many people do actually drive to West Sacramento to go shop there but obviously that is a hassle as you need to ensure you have the right vehicle, etc. I've known people who rented a truck to make the trip.

The question is will it be profitable. The model for Ikea now in the US with these massive giant super high volume store/warehouse type operations strikes me as ultra low cost with a lot of expenses cut out of the system. This absolutely is passed on to the customer in the form of lower prices.

Once they are running smaller stores, moving smaller lots of merchandise around more, to different locations, I think expenses will go up and so will prices.

At that point in these medium markets if they can't be as low priced, and also can't have as much selection (due to a smaller store) then suddenly their competitive advantages diminish. So maybe they won't be such a threat to Target.

[Romr123]

Last June we had a wander through the new downtown Toronto Ikea store. It is a showroom/retail only (all warehouse stuff goes to one of a constellation of delivery points in the surrounding neighborhoods). The store was on 2 levels, probably about 70k sqft, had an Ikea cafe, and seemed to be a pretty logical addition to the huge suburban stores (which you'd go to if you were doing a an entire kitchen) appropriately scaled/sized for an urban environment.