Time is right: David Hood says the IKEA plan is to have 11 to 12 stores in Australia. Photo: Arsineh Houspian
IKEA, the Swedish furniture and homewares chain famous for its flatpack wardrobes and bookshelves, is accelerating its Australian expansion before the launch of a new global online platform.
IKEA plans to open four 25,000 square metre stores by 2016, taking the total number to nine, and IKEA country manager David Hood sees scope for another three or four company-owned stores on the east coast by 2020.
The $ 400 million investment, to be jointly funded by the local company and its Swedish parent, follows two years of strong sales and earnings growth after IKEA cut prices as much as 50 per cent and lifted its focus on categories such as kitchens, dining rooms and outdoor furniture.
“We had always planned to grow to somewhere between nine and 11 or 12 stores,” said Mr Hood, a Scot who worked for IKEA for more than 20 years overseas before taking the helm here six years ago.
“The difference now is we’ve made a decision to grow faster and open more stores one after another. We grew quite strongly last year and this year has been very strong for us – trading has been excellent, in both visitations and conversions, average tickets and overall turnover.
”We feel the time is right to make these preparations.
“Our stores take a long time to develop and plan for and the first [new] store won’t open until 2015.”
IKEA Australia’s most recent annual accounts show profits rose from $ 13.5 million in 2012 to $ 19.2 million in 2013 on sales of $ 666 million.
Mr Hood flagged another year of sales and profit growth this year, saying sales in categories such as outdoor furniture had grown 50 per cent and kitchens by 20 per cent, despite increased competition from Wesfarmers’ Bunnings and Woolworths’ Masters chain.
“One reason we’ve been able to do this is we have the complete offer, not just the kitchen but the pots and pans and appliances and tableware,” he said.
The four new stores will enable IKEA to take advantage of a new global online retail platform to be rolled out to all 44 countries in which IKEA operates over the next two years.
IKEA Australia does not have an online retail platform, much to the frustration of consumers who must tackle the company’s 800-space carparks and work their way through 11,200 square metres of floor space to make a purchase.
Mr Hood said online ordering would be centrally based but products ordered by Australian shoppers would be distributed from the closest local store rather than from overseas or interstate.
“The stores will play an active part in the online offer and that’s why it’s important to have a footprint that allows us some picking and fulfilment,” he said. “You can’t ship a 90-kilogram wardrobe from Sydney to Queensland.”
Mr Hood expects online sales to reach about 10 per cent of total sales – equivalent to one bricks-and-mortar store – in line with industry benchmarks.
“We don’t see online as an alternative, that it’s going to supersede our stores, we see our stores as absolutely crucial because of the way we show our products,” he said.
“We want to show people this is how your life can be.”
The new stores are in Sydney’s Marsden Park, Canberra, Campbellfield in Victoria and north of Brisbane.