More Irish stores and web shopping planned by Ikea
Published 22/05/2016 | 02:30
Ikea is building an online shopping service for Ireland and looking at opening stores outside Dublin, after years of record sales at its sole Irish outlet.
Jack Jackson, head of format development for Ikea in Ireland and the UK, said the Swedish flat-pack group was evaluating its entire strategy for Ireland based on the strength of its Dublin store.
The vast retail warehouse, located in Ballymun, north Dublin, generated sales of €132m last year (17pc growth) and pre-tax profit of €13.2m.
It is regularly cited as Ikea's most successful European store with annual revenue growth consistently hitting double digits, as Irish shoppers lap up iconic designs like the Hemnes day-bed, Ikea's top-selling product in Ireland.
The Kallax shelving unit and Malm dressing table are its second and third most popular products in Ireland, followed by the iconic Billy bookcase and Pax wardrobe.
"I don't know if the Dublin store is still first in Europe in terms of sales but it's certainly not far off," said Jackson.
"The strength of growth in the Dublin store has prompted us to evaluate our entire plan for the Republic of Ireland.
"We don't have plans yet outside of Dublin but we have ambitions now."
The company has just announced a second outlet for Dublin's Carrickmines on the southside, a much smaller store compared to the Ballymun emporium, whose primary function will be to act as an "order and collection" point and a planning centre for shoppers to map out their new kitchen or bathroom.
It should open by August, just before Ikea's flagship annual catalogue is released. It forms part of a trial of "order and collect" outlets being tested in a select few cities around the world, as Ikea works to get physically closer to customers and adapt to their changing expectations.
With car ownership falling in many European countries, more and more homeware shoppers are seeking city centre stores or the ability to buy online and pick up from drop-off points.
"The aim of the 'order and collect' model is to make Ikea accessible to more people, particularly those who are time-poor and don't want to travel to a larger store out of town," said Jackson.
The model is also easier and quicker to roll out, he added. One store Jackson worked on in Tottenham in the UK took nine years from inspiration to finish. "Bringing a store to market is a long and complicated process."
The company is also pouring money into improving its online systems, including an initiative that will smooth the flow of orders. Its website received 1.5bn visits last year.
Irish shoppers cannot currently buy Ikea products online but that is likely to change in the near future; the "order and collect" outlet appears to be laying the foundation for that.
"We have plans to introduce an online shopping facility in the Irish market, details of which will be announced when finalised," a spokesperson said.
The group intends that 10pc of its €50bn sales target will be made online by 2020.
Online furniture sales are booming in many markets around the world; in Germany they rose to 6pc of a €32.6bn market in 2015, up from 4pc in 2014, according to the BVDM furniture lobby.
However, some other very competitive companies are already establishing a foothold in online furniture sales, companies like Amazon.com, whose profit margin is under 2pc. A report by Bloomberg suggested Ikea's is 14pc or more.
Is Ikea making a mistake moving away from what it does best? After all, the Swedish flat-pack group built its success on shoppers driving to its out-of-town outlets and collecting purchases themselves from warehouses.
Its maze-like store format also tempts customers to make impulse purchases of smaller items like candles, picture frames and napkins, an important source of revenue.
"There's no replacing the value of a traditional store, the importance of touch and feel and the visual impact of seeing things laid out," Jackson said.
The company is not abandoning what it does best, he added.
More of its traditional stores and an improved product offering are also on the menu for 2016 to help total sales grow between 8 to 10pc annually in coming years, according to chief executive Peter Agnefjaell. Products such as solar panels will hit the shelves in 2016.
For Ireland, its product offering will have lots to entice young families. That demographic is probably its best customer here, Jackson said.
"Ireland has a young population which really embraces modern European design.
"There are a lot of young families here, meaning a lot of demand for affordable furniture and interiors," he said.
"Ikea's children's range is exceptionally popular in Ireland, which we think has to do with a lot of young families, too."
Globally, its geographic priorities are emerging markets, even despite recent market turmoil.
Chinese and Russian revenue fuelled an 11pc increase in 2015 sales. Turnover grew by almost 20pc in China and more than 10pc in Russia.
Eight of the world's 10 biggest Ikea stores are in China, catering for the country's growing middle class.
Customers in China famously take the term "try before you buy" to the next level, with families who devote entire days to the store often stopping to nap on the beds and chairs on display.
"China and Russia are at the top of the pile," Agnefjaell said.
The company plans to open three new Chinese stores in Guangzhou, Suzhou and Chengdu, Agnefjaell said.
It will likely enter the Indian market next, the chief executive added.
Sunday Indo Business