Ikea global retail boss Tolga Öncü may oversee a vast portfolio of stores around the world, but the UK is getting a lot of his attention right now.
It’s no surprise. The UK – and London in particular – is a big expansion priority for Ikea and is delivering strong sales right now as shoppers invest in their homes post-pandemic.
Last month, Ikea said that sales in the country jumped 13% to £2.2bn in its year to 31 August.
To serve this growing demand, Ikea plans to invest £1bn in the capital over the next three years in the aim of becoming more convenient and accessible to its customers.
This includes a new £33m warehouse in Dartford, Kent, opening in May, which will expand its fulfilment capacity in London by 20%.
“London is a mega city,” says Öncü. “We want to make sure we’re serving Londoners. The team there is looking for further opportunities to expand.”
New stores
New format stores are also in the offing in the capital. Last February, Ikea brought its small-format inner city format to Hammersmith, in a UK first.
The store, which is around a quarter of the size of a traditional Ikea shop, stocks around 4,000 products and its roomset design is radically different to the retailer’s traditional Market Hall concept.
Although larger furniture pieces are on display in the Hammersmith store, they can only be ordered for delivery.
Öncü says the Hammersmith store has been “extremely successful” in its first 11 months of trading and we should expect more small stores going forward.
“It complements our existing Ikea stores and is closer to where many people work, live or socialise,” he says.
Another very different, and very exciting, new store is set to open in London this year – its much-awaited Oxford Street flagship.
Öncü is tight-lipped about what to expect but teases that Oxford Street will debut some elements never before seen in Ikea stores.
“There are some new components that we haven’t tried in any Ikea location in the past. Things that we think that can increase engagement, local relevancy and provide a voice for certain topics that are important for Londoners.”
Bringing Ikea to where customers live, shop and socialise
Its London plans are reflective of Ikea’s long-term vision to become more convenient and accessible by bringing Ikea closer to where customers live, shop, and socialise.
This is increasingly bringing the homewares behemoth into city centres like London as the trend to urbanisation grows.
In 1960, only 34% of the world’s population lived in cities – in 2020, this exceeded 56%.
This shift to city centre living is also driving change in what shoppers are buying from Ikea. It means that living space is shrinking at a time when many people who have embraced flexible working are using their homes more.
Öncü says that strong demand for storage solutions was part of the reason Ikea delivered a “really, really great performance” over Christmas. “We saw a significant increase in sales,” he says.
“There’s a lot of need for storage. People say they are tackling a lack of space, and that’s crucial about how they feel about their homes.”
Ikea is also developing multifunctional furniture, such as the foldable bed and desk, which helps transform a bedroom into an office to help shoppers better use smaller spaces.
Changing shopping behaviours
Whilst the drive to become more accessible is paving the way for new Ikea stores, it has also led to one very notable shop closure last year.
The retailer shuttered its Tottenham branch at the end of August, 17 years after its opening caused a riot with a 1,000 cars said to have queued up on its first day of trading.
Ikea cited “changing shopping behaviours” as its reason for closing the big box store.
Öncü says: “We might exit an asset but want to be part of shoppers’ everyday needs. We might do that in different ways, be it serving them digitally, or investing in new or existing formats.”
He points out that Ikea is investing in its existing big box stores in Croydon, Wembley and Greenwich.
Expanding across the UK
However, Ikea’s expansion opportunities go beyond the capital.
“There’s still lots of people in the UK as a whole where it feels like Ikea is not as close to them as we should be,” acknowledges Öncü. “We’re continuing to look for other opportunities to make sure we’re easily accessible to those people.”
In fact, just last month Ikea opened a Plan & Order Point in Aintree in Liverpool.
Plan & Order Point is a small store – the Aintree branch is just 75 sq m – dedicated to kitchen and bedroom planning. It is designed around giving customers that are undertaking a home design project advice, with a big focus on one-on-one consultations with Ikea’s experts.
Shoppers can make orders at Plan & Order Points, but will be unable to take products away on the day.
Ikea is planning two further Plan & Order points are planned across the North West, in Preston and Stockport, and Öncü says more could be in the offing elsewhere in the UK.
The format is a good fit for the UK consumer, who Öncü says are far more tuned in to omnichannel shopping than across Ikea’s other markets.
“UK shoppers expect retailers to know them whether they are using an app, the web or stores. The UK is at the forefront of omnichannel, which is why we’re making such big investments there,” he says.
The strength in omnichannel was evident in Ikea’s latest results, where online grew to more than a third (36%) of total sales in the UK, compared to just 19% before the pandemic.
To serve this growing number of omnichannel shoppers, Ikea has launched a trial click-and-collect format at the car park at a selection of Tesco stores.
The first UK Collect Near You point opened in October at Tesco in Blackburn and allows customers to collect their Ikea orders for free on purchases of more than £200 or for a £10 charge for orders below that threshold.
It is rolling out the format to six further pilot sites in Doncaster, Cambridge, Dereham, Bolton, Stockport, and Liverpool for the six month trial.
Cutting prices
Ikea is clearly planning for growth and there are signs that it is already attracting new customers.
Öncü says the retailer is not only experiencing an increase in sales but an increase in footfall too, which he believes illustrates new customers are coming through its doors.
The retailer is hoping that its recent move to cut prices will woo more shoppers.
Ikea was forced to raise prices across large parts of its range in its last financial year due to the soaring costs of materials, transport and energy.
However, late last year the retailer started to bring prices back down as commodity prices started to fall.
Öncü says his “optimism has increased” that it can lower prices more widely in the year ahead.
“Our intent is to lower prices as soon as we see commodity prices reduce,” he says. “In metal and plastic we have started to invest in lowering prices and response has been remarkable.”
By improving both affordability and accessibility, Ikea looks set to further capitalise on UK shoppers’ desire to improve where they not only live but increasingly work too.
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