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Shopping Centers Today -> April 2002
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IKEA ON THE MOVE
Scandinavian furnishings chain aims for 70 stores in North America
By Gregory J. Gilligan
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| With about five new U.S. stores planned to come on line each year until 2013, Pernille-Spiers Lopez, IKEA North America’s president (center), has her work cut out. |
Seventeen years after its arrival in the United States, Swedish home furnishings retailer IKEA International is set to begin a big North American expansion.
“My vision is to put IKEA on the map in the United States as a household brand,” Pernille Spiers-Lopez, who became president of IKEA North America last year, told SCT.
The chain, which has opened 15 stores across the United States since launching its first U.S. unit in 1985, is planning to add 50 new locations in North America by 2013. That means five new stores each year for 10 years, beginning next year.
“We have spent a number of years preparing ourselves for this growth,” Spiers-Lopez said. “It’s a big country out there, but we’re ready for it.”
Founded in Sweden in 1943 and now based in Denmark, IKEA has endured growing pains since taking a gamble on its first U.S. location, a suburb of Philadelphia. The first few stores did not initially meet with all-around approval. For a start, most American consumers weren’t certain how to pronounce the chain’s quirky moniker. (IKEA is an acronym derived from the first letters in founder Ingvar Kamprad’s name, the first letter of his boyhood farm, Elmtaryd, and the first letter of his home village of Agunnaryd, Sweden.)
Neither did U.S. consumers know how to utter some of the foreign-sounding names given to IKEA’s contemporary-style furniture and products, such as the Poang chairs or the Nikkala sofa.
The merchandise was also smaller than Americans were used to. Bedding, for instance, didn’t match up with U.S. standard sizes, and frustrated shoppers were forced to buy sheets from IKEA for their new beds. Drinking glasses were smaller because Europeans often don’t add ice to their beverages.
Retail experts and even consumers questioned in the mid-1980s whether IKEA would survive in the United States, said Wallace W. Epperson Jr., a furniture industry analyst with Richmond, Va.-based Mann, Armistead & Epperson, an investment banking firm.
Their confidence was shaken further by the closure of Mobel Walther, a large German furniture retailer similar to IKEA in Atlanta, after 18 months in business.
“They had a tough time at first,” Epperson said.
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Spiers-Lopez acknowledges that IKEA’s entrance into the United States has been a long, hard road.
“America is a difficult and challenging market to break into, but IKEA is a company that always thinks long term,” she said.
Through the years, though, shoppers have warmed to IKEA’s brand of assemble-it-yourself furniture, housewares, rugs and decorative items. The chain changed its merchandise to better reflect American consumers’ taste for larger beds and sofas, and even stocked wider home-entertainment cabinets to house their bigger-screen television sets.
“They have modified what they sell by Americanizing it,” Epperson said. “They have learned from some lessons, and they have made some corrections. They are much more comfortable now that they know the American market and know they have a more viable concept here than they did back in the mid-1980s.”
Not only has IKEA proved itself in the United States, but it has identified a market niche that few others are going after.
“Now the brand name is highly recognizable,” Epperson said.
What’s more, it has figured out what American consumers want, noted Kurt Barnard, president of Barnard’s Retail Trend Report.
“They have spectacular-looking merchandise that appeals to a lot of young people and first-time home owners,” he said.
That fine-tuning and consumer acceptance are key reasons that IKEA is now embarking on an aggressive expansion plan after its snail’s-pace growth since 1985. (Besides the 15 stores in this country, IKEA has eight in Canada.)
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By 2013, IKEA plans to have about 70 stores in North America in its existing markets as well as new areas, with most of the expansion taking place in the United States.
“The United States’ population is ready for IKEA,” Spiers-Lopez said.
Barnard agrees, adding that IKEA’s expansion plan is conservative and that the chain could probably afford to open even more stores.
“IKEA is ready to take on the American consumer, and I think they will be very successful,” Barnard said.
To support the growth, IKEA opened a new distribution center in California in January and plans to open another in Maryland by fall. It is also opening a 40,000-square-foot catalog sales customer care center in Baltimore.
IKEA’s focus will initially be to replace some of its older, smaller units with larger stores and to add new stores in existing markets. In late November, for instance, the chain relocated its store inside the Potomac Mills mall in northern Virginia to a 10.6-acre site on the edge of the shopping center’s property. The huge, two-level store, twice the size of the old location, is visible from Interstate 95.
The old IKEA store was already pretty big by retail standards. But it was nevertheless so cramped on busy weekends that customers complained, said Tomas Franzen, the store’s manager.
At nearly 300,000 square feet, the new IKEA near Potomac Mills carries 3,000 additional products and showcases nearly 10,000 items. Forty-three room settings dot the second floor, up from 18 at the old store. Three different “homes” are furnished inside this new store to reflect a variety of lifestyles, including those of a bachelor, a young couple and a single mother with girls.
The kitchen area has 17 full displays, compared with eight before, and the children’s play area has been expanded. The aisles through the store are wider, too.
This store alone should generate about $90 million in sales per year, compared with $75 million at the former location.
IKEA locations are destination stores, drawing consumers from hundreds of miles around. Consumers come from as far away as Atlanta and Charlotte, N.C., markets that don’t yet have IKEA stores of their own, to shop at the Potomac Mills store, Franzen said.
Relocating the Potomac Mills store is also symbolic, Spiers-Lopez said, because it confirms that IKEA is ready to expand in the United States. It was the chain’s second U.S. store, opening in 1986.
Meanwhile, IKEA’s U.S. bridgehead store in the suburban Philadelphia location will be relocated next year.
“We’re ready to go,” Spiers-Lopez said.
Gregory J. Gilligan covers the retail industry for the Richmond Times-Dispatch.
 | Current Issue November 2008 |