NZ to feel Ikea effect
The Swedish giant’s arrival will put the likes of Briscoes and Kmart on notice.
Some retailers might well be quaking in their shoes now that Swedish furniture giant Ikea has confirmed it’s finally coming to New Zealand.
Ikea’s worldwide franchise holder, Inter Ikea Systems, has said it is looking at entering the New Zealand market, although a location is yet to be announced.
The giant retailer will need a huge area with good motorway access, presumably in Auckland. One of the few places that might fit the bill is Westgate, though the town centre’s manager has said only that it was one of a number of logical locations.
As retailers digested the news yesterday, Greg Harford, public affairs manager of Retail NZ, said players in the homewares and furniture market would have to sharpen up their act, because the Swedish company is known for its competitive prices.
Overseas, it also sells a limited grocery range and a number of bathroom and bedroom products.
In New Zealand, that’s likely to put Ikea in competition with The Warehouse, Nood, Freedom Furniture, Briscoes, Kmart, Bunnings, and Mitre 10, although Harford said Ikea was more of a young person’s brand.
The arrival of such a big player would put smaller retailers on notice also, Harford said.
‘‘You’re never going to be able to compete head-on with Ikea on price. What’s going to mark you out is customer experience and service, so you need to be looking carefully at your offering and making sure local people have a real reason to shop with you.’’
Chris Wilkinson, managing director of retail consultancy First Retail Group, said Ikea’s announcement was exciting for consumers and for the innovation it could bring.
But it would be a challenge to some retailers. Kmart, for instance, had been finding favour with Kiwi shoppers with the way it presented its homewares, much like Ikea did.
‘‘Kmart has had a long honeymoon recently ... but this will have an impact on many different categories right through from The Warehouse to Freedom to other businesses as well.’’
The Warehouse would be possibly less affected because of its sheer number of stores spread around the country, compared with the one or two stores Ikea might open.
Ikea said it would work with a company called Ingka Group to open its New Zealand stores.
Ingka Group’s retail operations manager, Tolga Oncu, said: ‘‘We see this as a long-term commitment and investment in New Zealand, building relationships with customers, suppliers and future co-workers.’’
Jonathan Elms, the Sir Stephen Tindall chair in retail management at Massey University, said the brand’s arrival would result in a series of ‘‘quite significant’’ changes to New Zealanders’ shopping habits. It was an exciting development, he said.
New Zealanders were not necessarily fond of the Ikea model of do-it-yourself assembly furniture, but they would get used to that over time, he said.
‘‘Overall it’s a big business setting up a site, [with] jobs being created and a halo effect around where those sites are as other businesses pop up.’’
He said the location would
have to be selected carefully because Ikea stores tended to be destination shops, which created traffic issues.
‘‘I remember when the first Ikea opened in the UK there was a four- or five-hour queue on the motorway to access it,’’ he said.
Bodo Lang, head of the marketing department at the University of Auckland’s business school, said he was surprised by the announcement, given the population size and density needed to sustain an Ikea mega store.
Its key competitors – from Freedom Furniture to Harvey Norman – would be the first to feel the arrival of one of the most well-known brands in the world, Lang said.
‘‘However, if the Ikea stores that were launched in New Zealand were not like the mega stores that consumers have become accustomed to, then this level of customer euphoria would be greatly reduced and the impact on other retailers would be greatly diminished.’’
His colleague, Mike Lee, said it could be the end of the handful of businesses importing Ikea goods and selling them at a mark-up to New Zealanders.
‘‘I can say this because half my house is furnished with Ikea products; even after paying the mark-up and importation taxes the quality and cost of Ikea products were still superior compared to most of the available options we have had thus far.’’
‘‘When the first Ikea opened in the UK there was a four- or five-hour queue on the motorway to access it.’’ Jonathan Elms, Massey University