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July 24, 2018

How can IKEA make a success of high street stores?

IKEA will have to offer an extensive range of ‘marketplace’ favourites that customers can take home for its new small-format stores to succeed.

By GlobalData Retail

This is not the first time IKEA has trialled a small-store format; in November 2015, IKEA launched its first order and collection point (OCP) in Norwich, and subsequent central locations, including Westfield Stratford shopping centre, in 2016. But, with only a small selection of products that you could take home with you, and an initial collection charge of £10 (although this has since been dropped), the formats have not been the hit IKEA had hoped for.

Second time round, IKEA needs to do things differently and offer more of the products that consumers do not believe are worth the journey or hassle of visiting one of IKEA’s big-box stores. In short, this means bringing its homewares range to the high street, and competing with Scandi value general merchandiser Flying Tiger Copenhagen, as well as the high street fashion retailers offering design-led homewares.

Alongside the new small stores, the first of which is due to open in autumn in an old Multiyork site on Tottenham Court Road, IKEA promises to introduce next-day delivery on almost all its 10,000 products – though at what cost is unknown. The high delivery charges at IKEA have long been a contentious issue with online customers, but IKEA has consistently maintained that these customers could not be subsidised to the detriment of instore shoppers. This view from IKEA is slowly eroding – another sign of change occurring; IKEA is currently running a promotion of free parcel delivery for orders over £60 and half price truck delivery for orders over £300.

In many ways, IKEA’s store-based business model is archaic in today’s retail market. And while this has been a winning formula for the retailer to date with its big-box stores heavily cash generative, the home retailer has belatedly realised that it has to adapt and promises to ramp up the rate of change.