Ikea, the retailer known for those gargantuan shopping emporiums out on the edge of town, is in the midst of a retail reinvention to rethink its footprint, experimenting with smaller stores in more urban locations. But it’s most certainly a work in progress.
With the recent announcement of the closing of its Queens, NY 115,000-square-foot store – giant by most measures but barely a fifth the size of most of its locations – Ikea continues to find its retail sweet spot that will reposition the home furnishings chain for its next generation.
It’s clearly not just about the meatballs.
Queens for a Day…Actually Two Years
Opened with great fanfare in January 2021 – delayed as so many things were by the Covid pandemic – the store in Queens was situated in the Rego Park shopping center and was a scaled down version of the signature 500,000-square-foot mothership model. It was designed to offer urban dwellers a nearby alternative to schlepping out to the ‘burbs to get their Ikea fix.
Ikea has moved on a number of fronts to be more online savvy. Over the past two years it has introduced a transactional app and developed a virtual escape room that it placed on Snapchat. Ikea is also stepping up its initiatives in the field of AI.
But only a few weeks ago Ikea told its faithful the store was closing in early December, saying it was due to “the changing needs of our customers.” The Robin Report asked for a little more explanation and this is what Ikea told us: “The Queens location is part of the first generation of small city stores for IKEA U.S., and we have many learnings that we will apply to our future locations. As we continuously test, explore, and develop our IKEA formats to meet our customers where they are, we will take learnings from each new customer meeting point that we open, so that we are constantly improving.”
Maybe something got lost in the translation from the original Swedish, but reading between the lines, we take this statement as simply, “It wasn’t working.” How much of that was due to the shifts in pandemic shopping patterns and how much to the wrong format in the wrong location is something we’ll probably never know. But taken with the 2020 closing of its year-old Manhattan Ikea Planning Studio, a small space on the Upper East Side that was all about custom kitchen cabinetry and pick-up and return services for other Ikea goods, it’s clear that the retailer is still trying to figure out the right formula for urban locations.
Selling in the City
Both New York City formats were part of the company’s plan to expand Ikea into inner city locations with different sizes and services. It has been moving in the same direction closer to home, in Europe, where it has opened dedicated stores for kitchens or closets or other categories. Last year, Javier Quinones, president and chief sustainability officer of Ikea Retail U.S., told The Robin Report that this three-tier format was the new plan going forward. He said Ikea had targeted four other markets besides New York — Los Angeles, San Francisco, Chicago and the District of Columbia – and that each would get at least one of all three formats in the next three years.
The big stores will not disappear, he said. “They will continue to play a key role in offering the complete Ikea experience. We now have three different formats depending on what the customer wants, and every customer will have an Ikea touchpoint within 20 minutes of where they are. But we don’t talk about multi-channel, it’s all one channel.”
We asked Ikea for an update on the status of its small store plans, and they said, “Two small format stores have opened in London and one in Stockholm, Warsaw and Madrid. There is one in Canada with another planned in summer of 2023. We have also opened smaller IKEA stores in the heart of Paris and Moscow and have new locations coming to Rome and Tokyo. “In the U.S., we opened two new planning studios in Long Beach and Arcadia, CA, in August 2022. Additionally, we are working with our sister company, Ingka Centres, to create a new destination on Market Street in San Francisco, which will be anchored by a smaller format IKEA store.”
Google searches do not show any current small-format locations in Chicago, San Francisco or the District of Columbia. No New York City stores remain open besides a traditionally sized location in Brooklyn, but a recent report on the Queens closing on Timeout.com quoted the Commercial Observer that Ikea still planned on opening a Manhattan location “once it finds the right space to do so.”
Online On Target
Even as it continues to find the right mix for its physical stores, the retailer is putting more emphasis on ecommerce, once an afterthought for the company. Pre-Covid it accounted for about 15 percent of its U.S. sales but that has since shot up to 25 percent and Quinones said it could eventually be half of Ikea’s overall U.S. sales “but it will take time.”
In the meantime, Ikea has moved on a number of fronts to be more online savvy. Over the past two years it has introduced a transactional app and developed a virtual escape room that it placed on Snapchat. Ikea is also stepping up its initiatives in the field of AI. Barbara Martin Coppol, chief digital officer for the company said in an interview in 2020 with the British website Verdict, “Very soon we will give to people digitally the possibility of designing your home in photographic quality 3D from the comfort of your couch in a very simple way. So, you take a picture of your interior, and we will be able to swap in and out different furniture that you choose in order to really visualize how it will fit. All of that is part of new experiences online, and I think it’s really important to continue doing that in order to really visualize how it will fit.” Of course, view-in-room and image manipulation have become standard on many home furnishings sites, particularly at Wayfair which was an early pioneer but more recently at Williams Sonoma brands and other retailers. Ikea continues to play catch-up online, being late to the e-com party.
Not Your Same Old Meatball
With more than 50 stores in the U.S. and sales approaching $5 billion here, Ikea is generally considered to be the first or second largest seller of home furnishings products in the country, give or take Amazon and Wayfair. It is stepping up its approach to sustainability initiatives, recycling products and even providing assistance for inflation-impacted employees. For a retailer that had previously put such efforts not just on the back burner but on no burner at all, it’s a remarkable transformation, even if it is one with a few speed bumps. It’s not been afraid to move from its well-established status quo and there aren’t many retailers anywhere in the world that can say that.