Ikea expansion, employee development plans on target
By Clint Engel -- Furniture Today, January 27, 2003
Conshohocken, Pa. — It's been a busy year and a half for Pernille Lopez.
It started with a new title: president of Ikea North America. And the Sweden-based home furnishings retailing giant had just announced its most aggressive expansion plans ever — a net 50 new stores in 10 years in North America.
In addition to shepherding that growth, Lopez wanted to improve customer service and deepen Ikea's strong employee development focus.
Earlier this month, during a preview of the retailer's new flagship store here, she detailed progress in all these areas. The Conshohocken opening signaled the launch of the 10-year growth plan, which should push Ikea's North American store count to 74 and its furniture, bedding and accessory sales to $4 billion or so in 2014.
At 325,000 square feet, the store includes many of the customer-service improvements Lopez has been shooting for — sharper displays and more space, more cash checkout lanes, an improved play area for children, a showroom layout that better interprets the way people live and think about home furnishings.
As for employee development, Ikea North America has instituted a number of new programs, from personal development mentoring to flexible hours to full benefits for employees working as few as 20 hours a week. In the past four years, the company has cut its turnover rate in half.
"Anybody who has worked in retail knows that it's a tough business," Lopez said. "We want to make Ikea the best retailer to work for. I really want ... co-workers to have no reason to go to any other retailer."
The company got off to a bit of a rocky start in 1985 when it entered the United States with its Plymouth Meeting, Pa., store, which the Conshohocken unit replaces. Ikea was criticized for its too-small beds, too-firm sofas and too-small drinking glasses, all at odds with the American consumer's thirst for softer and bigger things in the home.
But after a period of denial, the retailer adapted and grew into one of the largest furniture chains in the nation. During the past two years, when many were struggling, Ikea continued to rack up impressive sales increases.
Total revenues at its 15 U.S. stores grew to $1.27 billion for the fiscal year ended Aug. 31, 2001, as furniture, bedding and accessory sales jumped 23.3% to $826 million, placing it No. 7 on Furniture/Today's survey of Top 100 U.S. furniture stores. Ikea doesn't disclose profits.
This past year, same-store sales increased 5%, Lopez said. A sales figure for furniture, bedding and accessories was not available, but, based on the same percentage breakdown as the previous year, those sales should have amounted to nearly $873 million.
While results have been strong, Ikea and Lopez are looking for more.
"My job is to increase our sales every year 10%," she said, adding that kind of growth is coming from its stores in Chicago and Pittsburgh. "That's what we're here to do — grow market share, grow our volume. There will be years where we'll have less of an increase, but we'll keep the long-term perspective, and that's what every store works toward."
To do this, Ikea will open new stores, grow business at existing stores and in existing markets, and develop its people.
Conshohocken is home to a vast assortment of updating and it hints at more to come. It's the new standard size, and the layout plays up home furnishings areas where Ikea sees big potential growth.
For instance, bedroom and bath categories have been grouped together to create a category Lopez calls "private living," and room settings include everything from beds to wardrobes to textiles and accessories for both the bedroom and bathroom.
"Consumers are looking for an oasis, a retreat after a busy day," she said. "I think you will see over the next couple of years that that's where a lot of the development of our assortments will come from.
"And we really are focusing on bedroom furniture and this whole feeling of a nice place to relax."
Ikea also is grouping kitchen and dining together, which Lopez calls "the heart of the home." All nine kitchen room settings in the new store here are actually kitchen/dining rooms, with everything from full dining rooms to casual breakfast nooks.
The retailer also has a new emphasis on textiles, now more than ever a fashion business. And at its Burbank, Calif., store, now being remodeled, Ikea will take its decorative accessory business to new heights by re-launching it as "home decoration," blending and expanding its gift shop and home accents "so instead of going to many different places (in the store) for accents for your living room or your bedroom, it will be in one place," Lopez said.
Conshohocken also is the North American test site for a new Marketplace of accessories, lighting, cookware, glassware and other small items. It features wider aisles, better sight lines and a central café with gourmet coffees and snacks. If successful, Marketplace will be rolled out to new and existing stores.
Other innovations coming soon: a new "unboring" cook shop with a greater emphasis on mix-and-match items; and new looks in lighting, a category Lopez said Ikea has needed to freshen for some time.
Ikea refers to children as "the most important people in the world" and long has incorporated innovative and fun displays of toys and youth furniture, along with store play areas. This summer, the "Think cubic" theme will be replaced by "Living with parents," or something similar that emphasizes a child's perspective.
The theme will flow through the 2004 catalog, and even more attention will be paid to kids in displays and through the introduction of a new youth collection under the Ikea/PS label.
With each move, Ikea is distancing itself from that shaky start in 1985 and the furniture and glassware that didn't feel quite right in American hands.
"Today our hopes and dreams are bigger," Lopez said, "and so are our beds and drinking glasses."
