Inside Ikea's Swedish flagship | IR News

Inside Ikea's Swedish flagship

Posted Date: 01/11/2011

By Robert Stockdill

Ikea’s Stockholm flagship has been trading 46 years - but it is still the Swedish chain’s No 1 in size and sales.

At 55,000sqm, Ikea’s flagship Stockholm store is enormous by any measure. Bigger even than the southern hemisphere's largest to open in Tempe, close to Sydney's CBD, on November 3. That measures a comparatively modest 40,000sqm.

The Stockholm store spread over four floors and two interconnected buildings - and if you follow Ikea’s infamous winding path form entrance to exit, you’ll walk more than a mile (1.7km, we’re assured).

Perhaps the most astonishing feature is that in a store that size you might expect it to hold 40,000, 50,000, even 80,000 SKUs?

Not this one. Ikea’s total product range adds up to just 9600. What takes up the space in this giant store is the myriad of room designs which display complete settings using stock from different departments.

Anders Gyhlenius, for the last five years store manager of the flagship, told participants of the Westfield World Retail Study Tour earlier this year it’s a challenge to keep a 46 year old store at the head of the pack with new concepts opening every month.

“That’s how we are on our toes all the time. You build a brand new store and you take the lessons from the last store, and from the last year and the last five years and you improve and then you compare it to us.

“So I’m really, really happy we are still number one.”

It’s also “very profitable” - although, naturally, Gyhlenius won’t reveal any specifics. Some Norwegian stores are nudging the Stockholm store’s sales performance, as well as three in Russia, where Gyhlenius led store development for several years prior to his current role in what he describes as “a fantastic market”.

Globally, Ikea has 300 stores and turns over about 25 billion euro. That’s huge by Australian standards, but makes it less of a global retail giant than many might imagine.
Back in Stockholm, this homemaker’s heaven, about 15 minutes drive from the CBD, hosts around 4.2 million visitors a year. On weekends, visitor numbers peak at 20,000 a day.

Customers visit an average of seven to nine times a year, loyalty club members more often.

But such is Ikea’s market strength - it has a 25 per cent share of the national market in a population of 9 million with just 17 stores - 98 per cent of customers have been to the store before and usually know exactly what they want, says Gyhlenius.

“They either use the catalogue they got in their mailbox or that they get here, or - more and more today - they go onto the internet. They can also purchase by mail order from home.

They come here and touch and feel the stuff, then go home and order on their computer.”

He estimates online sales now account for five to six per cent of Ikea’s turnover in Sweden. Initially the company put all 9600 products on sale on the internet, but the fulfilment costs were alarming, so the offer was scaled back. Too far, apparently. Another revision due soon will see the range increased to about 5000 products.

While the internet as a driver of sales is growing fast, the famous Ikea catalogue is by far the company’s greatest marketing tool.

Some 300 million of them are printed worldwide every year - essentially the same catalogue, but in 47 languages. Nine in 10 items it sells are available in every market in which it operates.

Ikea changes out about 30 per cent of its product range annually. It used to make the changes all at once in line with the new cataolgue, but it now has three phases. A core range never changes.

The photos accompanying this feature illustrate how good Ikea is at visual merchandising and creating solutions customers can replicate in their homes.

If you’ve been through a large Ikea store in Australia, then you’ll feel reasonably at home in the Stockholm flagship - just perhaps a little overwhelmed by the size and scale.

After entering, customers ride a long escalator to the top of a circular building where a sloping pathway gradually takes you down four floors of furniture and room solutions.

The upper floors of the adjacent square building offer more of the same, along with a generously sized cafe (with food so cheap it must effectively be sold at cost) and eventually the customer reaches the ground floor with warehouse style shelving, bulky items and a mini supermarket selling Swedish foods.

There’s a supervised creche for children and family friendly changing rooms with free nappies.

Yes, it’s formula Ikea but it is so large and overwhelming it’s breathtaking. And as the photos show, the sophistication of the visual merchandising and product mix is stunning.

Keywords: Ikea, Westfield World Retail Study Tour

Comments:

Monday, October 31, 2011 by Michelle Barraclough - Child Friendly Solutions

Ha! Too funny Gary :)

Speaking for myself, I love that Ikea is so family and child friendly. Free nappies in the baby change room? Awesome customer service initiative.

Monday, October 31, 2011 by Gary

I heard that the Tempe store would have been finished sooner but it all arrived flat packed with one allen key and no one could understand the assembly instructions

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