Swedish furniture retailer IKEA last month announced it will open stores in New Zealand after much anticipation.
Swedish furniture retailer IKEA last month announced it will open stores in New Zealand after much anticipation.
IKEA is known for its enormous store footprints, huge car parks and endless options of furniture but that may not be the case for its New Zealand presence.
While there are locations that can house such stores, such as Westgate or South Auckland, New Zealand's population size means it isunclear whether the Swedish furniture retailer will replicate its big-box stores, albeit what Kiwis are expecting.
Later this morning, IKEA will reveal details of its planned entrance into the New Zealand market.
RCG associate director Andy Florkowski said Kiwis would be expecting IKEA to launch its classic big-box style stores but it could instead launch smaller stores.
"There is a lot of expectation around their arrival so they need to ensure that customers expectations are met, while ensuring that their entry is commercially viable within an already competitive market," Florkowski said.
"This may mean a smaller concept model that is tailored to the New Zealand market, whilst providing access to a much larger range of goods - making effective use of their digital channels.
"This would definitely open up a lot more opportunities with locations, and would be more risk-adverse for them to test the waters - although may not be what Kiwis would be anticipating."
Both are critical to a successful entry into the market, Florkowski said.
"There are a large number of expats and travelled Kiwis who are already brand champions for IKEA, and whom will be the percentage looking for the replicated model in New Zealand with the food hall and all. However, a large number of new customers for IKEA here, will not have had this exposure, so simply offering furniture at competitive price points, albeit with a smaller flavour of the larger model, may be enough to convert them."
John Polkinghorne, another associate director at RCG, said he believed there was space for IKEA to operate its big-box style stores in New Zealand.
The retailer's stores in Europe and North America are hundreds of square metres in size and most house an in-store restaurant.
"There's definitely a big enough market for IKEA to succeed with a large format store here, even notwithstanding that they are several times bigger than most Warehouse stores - double the size of even the largest ones," Polkinghorne said.
IKEA has three types of store: big-box, mid-range and the small concept store.
Auckland is touted for the first IKEA store, with analysts split between West or South Auckland for first the location.
"The market size in Auckland is definitely comparable to some of the markets they operate in Australia so that's a good entry to New Zealand," Polkinghorne said.
"It's good timing in terms of we've got strong population growth and housing growth and those are all things that relate back to them from a furniture and homeware perspective."
Long term, Polkinghorne believes IKEA would introduce "click and collect points" which it already operates across the Tasman. "It's a good way for them to get access to towns that are too small for a store. Across Australia, they have 10 stores and 40 'click and collect' points."
IKEA global CEO Jesper Brodin during the IKEA launch in India in August. Photo / AP
Retail analyst Chris Wilkinson said he believed IKEA would enter New Zealand with a large format store.
"A large format store would need to anchor their entry. And it won't necessarily need to be in a traditional location either," Wilkinson said.
"There's been a lot of speculation that it will be in one centre because that area is already populated with retail but the reality is that IKEA overseas has been able to establish themselves pretty much anywhere there are good road connections."
South Auckland was the most logical location for its first store because of its reach to the Waikato market and within a comfortable driving time of the Bay of Plenty, Wilkinson said.
"IKEA will be a destination in its own right and you will find that those people from the Bay of Plenty, Tauranga drive across."
Wilkinson said he expected IKEA to bring its restaurant feature to New Zealand stores.
IKEA global CEO Jesper Brodin will announce the first details on the arrival of IKEA to New Zealand at 9.30 this morning.
