The IKEA honey trap and why we love it
Six more IKEA stores might sound like a bad thing - particularly if you’re the sort that doesn’t enjoy its giant maze-like outlets - but rival retailers may be secretly pleased the furniture giant is expanding.
Like retail remora fish, these smaller retailers make a living feeding off the Swedish DIY’s back, even as it devours a juicy chunk of the homewares market.
And the key is our instatiable desire to beautify our nests, combined with the sheer drawing power of IKEA.
The homewares sector has been the strongest growing component of retail spending in recent decades, driven by a combination of population growth, lifestyle changes, the popularity of home improvements and relatively strong economic conditions, according to Sean Stephens of Essential Economics.
His analysis of official statistics show that in the past 20 years, demand for homewares has grown from $24 billion to $54 billion (in 2010 dollars).
Stephens says that although each of the new IKEA stores would have a one-off impact on competitors, the overall growth of the homewares market means that only poorly performing stores would be heavily affected.
Then there is the ability of IKEA to attract shoppers. The chain’s three company owned stores attracted 7 million visitors in the twelve months to August 31. (IKEA also has franchise stores in Perth and Adelaide).
This leads to what Deutsche Bank retail analyst Alexi Baker-McLennan calls the ‘honey pot’ effect, where rivals find that outlets near an IKEA perform better than other similar stores.
The theory is panned out by conversations I’ve had with retailers who have stores near the IKEA at Rhodes shopping centre in New South Wales.
Retailers at Rhodes shopping centre in NSW told me that they found that not only did the IKEA pull in the crowds from long distances, it attracted crowds looking to spend money which flowed on to other stores.
IKEA’s price points mean it is aimed at people wanting basic goods when they are starting out or don’t have that much to spend.
So retailers who sell high-end versions of IKEA products do particularly well near the store.
King of Knives told me that they find customers buy basic knife sets from IKEA and then come to them when they are looking to settle down and buy the good stuff.
But there is a sting in the tail for IKEA’s competitors.
Baker-McLennan says IKEA is moving into more upmarket, expensive furniture, with higher-quality items that cost more than the traditional IKEA range.
The message for upmarket retailers is this: IKEA noticed you are attached to its back, and it wants to shake you off and have you for lunch.
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