Ikea is accelerating its shift in the direction of smaller city-centre shops in Britain, as rising property taxes and altering purchasing habits blunt the attraction of conventional out-of-town megastores.
Peter Jelkeby, the outgoing chief govt of Ikea UK and Eire, mentioned the Swedish retailer would focus future enlargement on compact city codecs after sturdy buying and selling at its new Oxford Avenue flagship and central Brighton retailer.
The technique represents a transparent transfer away from Ikea’s historic “large field” warehouse mannequin, which dominated retail parks for many years and outlined the model’s British enlargement from the late Eighties onwards.
Whereas the group has no fast plans to shut present giant shops, Jelkeby confirmed that Ikea doesn’t intend to open any new megastores within the UK.
“We see extra potential in opening extra smaller shops like Oxford Avenue and Hammersmith,” he mentioned. “That’s the place clients are, and that’s the place development is.”
Jelkeby acknowledged that the rising value of enterprise charges has performed a job within the strategic rethink. Bigger retail items sometimes appeal to far larger rateable values, leaving operators uncovered to disproportionately giant tax payments.
Upcoming reforms will intensify that stress additional, with a brand new surcharge on industrial properties with a rateable worth above £500,000. Whereas meant to help smaller companies, the modifications will enhance the burden on supermarkets, malls and warehouse-style retailers.
“We after all wish to have decrease enterprise charges,” Jelkeby mentioned, including that reform must “come sooner reasonably than later so the local weather for retail may be optimistic”.
Alongside its city-centre push, Ikea can also be experimenting with mid-sized shops in retail parks that sit between its smallest city retailers and conventional megastores. New websites in Harlow, Norwich and Chester replicate what Jelkeby described as a extra versatile method to bricks-and-mortar retail.
Ikea believes it now has “sufficient large field” places throughout the UK and Eire, however will proceed investing in these websites by bettering fulfilment, click-and-collect and in-store companies reasonably than increasing their footprint.
The retailer closed its Tottenham megastore in north London in 2022 after concluding that central, smaller places supplied higher long-term potential within the capital.
The Oxford Avenue retailer, which opened in Could, has delivered sturdy gross sales throughout furnishings, equipment and meals, with demand for its restaurant exceeding forecasts.
“We’re studying quick,” Jelkeby mentioned. “We’ve needed to enhance checkout capability and scale up meals operations to deal with footfall.”
The UK enterprise is owned by the Ingka Group, Ikea’s largest world franchisee. Jelkeby will now transfer to guide Ikea’s German division, the place he plans to discover an analogous shift, utilizing the UK as a testing floor.
“Germany is our greatest market and extra conventional than the UK,” he mentioned. “Britain has allowed us to trial new methods of assembly clients the place they’re.”
