Amid flat retail sales Ikea plans 50-store expansion
By Bill Bergstrom, Associated Press, 1/16/2003 10:35
CONSHOHOCKEN, Pa. (AP) Amid flat sales for U.S. retailers, Ikea started a major U.S. expansion Wednesday, opening a large new store three miles from where its first U.S. store opened 18 years ago.
From a small showroom in a Swedish farm town in 1953, Ikea has become the world's largest home furnishings retailer with more than 175 stores in 31 countries. The United States, with only nine, is the next big growth target.
Ikea plans to open 50 North American stores in 10 years, including six in the United States and three in Canada this year.
Low prices put the Swedish furniture giant in a good position when consumers are tight-fisted, spokesman Clive Cashman said.
''If it's an economy where maybe people are holding off on large furniture, we've got small decorative items,'' Cashman said. Then, with new stores in place, ''We feel that we'll be in a very good position once things do come around.''
People started arriving around 1 a.m. and several hundred were waiting by 9 a.m. for the opening of the 325,000-square-foot store in suburban Philadelphia. The first 100 got a free Poang chair, a popular, colorfully padded armchair valued at $79.
''I tried to make it in time for the Poang chair but, too late,'' said David Park Payne, 30, of Cherry Hill, N.J.
Ikea's U.S. officials said they weren't apprehensive about misgivings that founder Ingvar Kamprad, 76, now honorary chairman, recently voiced about Ikea's expansion rate. Kamprad said he feared the consequences if an economic slump forced the company to close stores.
Lars Ridoff, deputy U.S. manager, said Kamprad feared that Aelmhult, the Swedish town of 16,000 where he opened his first showroom, had become overly dependent on the furniture company. Ridoff said Kamprad didn't oppose expanding in North America.
Ikea's sales rose nearly 22 percent to $10.3 billion in 2001, with about 286 million people visiting its stores worldwide. But its U.S. sales trail those in Germany and the United Kingdom, said Ridoff, who has previously worked for the company in Sweden, England, Switzerland and Spain.
''There are many major markets in the United States. We've only just begun,'' said Pernille Spears Lopez, president of Ikea North America, which is based in Plymouth Meeting.
Lopez sawed a log, rather than cutting a ribbon, with Sopranos star Jamie-Lynn Sigler to open the store. It is double the size of the Plymouth Meeting store that just closed.
Ikea plans to open stores this year in Costa Mesa, Covina, and East Palo Alto, Calif.; College Park, Md., and Paramus, N.J., and next year in the Boston area and near the Mall of America in Minneapolis. The company is looking at areas including Atlanta, Florida, Dallas-Fort Worth, Phoenix and Detroit, Lopez said.
Economist Ken Mayland, president of ClearView Economics, said Ikea carves out a profitable niche with its ''Scandinavian chic'' despite generally flat furniture and home furnishing sales.
''If you are going to put up that many stores over a 10-year period you should expect a slow year now and then and that shouldn't deter you,'' Mayland added.
Furniture analyst Ivan Saul Cutler, of Greensboro, N.C., said part of Ikea's success involves taking some of the pain out of furniture shopping.
''People hate to buy furniture. Ikea makes it easy. They get it now, they can touch it and feel it,'' Cutler said. ''The stores sort of reflect the world view and lifestyle of many consumers.''
If some assembly is involved, Cutler said, people don't mind because of the lower cost.
The store is designed to tempt people to make a day of it, with a children's play area, three dining areas including a hot dog, cinnamon bun and coffee counter in the checkout area and a grocery section offering herring, caviar and other Swedish specialties.
''My daughter just moved into her first apartment. She wanted it to look pretty but she didn't want to break the bank,'' said Sherry Hirner, 55, of Broomall, as she left Wednesday with three carts of merchandise.
Hirner also found furniture for her house. ''Now that we have an empty room we're going to put bookcases in it,'' she said. ''Our house is traditional. There's natural grains that will fit perfectly in ours.''
Kristin Hirner, 23, said she liked Ikea's designs as well as its prices.
''I always think of furniture stores as more old-fashioned. It's more reasonably priced, and it's cute. It fits my lifestyle,'' she said.
''The prices at Center City furniture stores are ridiculous,'' said Nicole Jacobson, 25, of Philadelphia, loading a car with boxes because, ''I finally decided to have my apartment stop looking like a college dorm and look like a real apartment.''
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