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Distribution Key To IKEA’s Midwest Expansion

March 25, 2013 Big Box, Featured, Media, Retail 19 Comments

IKEA sells simple looking modern furniture but its hardly a simple company. It is often misunderstood or misrepresented. Even simple facts are often wrong, which get repeated. For example:

The company has 285 stores in more than 20 countries and designs its own product which is then produced by more than 1,000 suppliers in 50-plus countries. With only 38 stores in the United States boasting an Ikea is regarded by many cities as a retail status symbol.  (nextSTL.com)

The number of locations/countries was repeated by two local mainstream news sources:

The furniture company has 38 stores in the U.S, part of a total of 285 stores in more than 20 countries. (STL Biz Journal)

IKEA has 38 stores in the United States and 285 locations in more than 20 countries. (KMOV)

Unfortunately this repeated information is inaccurate. From a February 26, 2013 IKEA press release:

Currently there are more than 298 IKEA Group stores in 26 countries, including 50 in North America (11 in Canada; 38 in the US; 1 in the Dominican Republic). IKEA has six distribution centers in North America. The IKEA Group employs 131,000 coworkers and had 655 million visitors in FY 11. (IKEA)

So these reports were short 13 stores and 6 countries, but did get the number of US stores correct at 38. True, 26 is “more than 20.” But even that doesn’t give the complete picture, there are 333 IKEA stores in total:

In January a Swedish documentary revealed that Interogo, a Liechtenstein foundation controlled by the Kamprad family, owns Inter IKEA Holding, which earns its money from the franchise agreements Inter IKEA Systems has with each IKEA store. These are lucrative: IKEA says that all franchisees pay 3% of sales as a royalty. The IKEA Group is the biggest franchisee; other franchisees run the remaining 35 stores, mainly in the Middle East and Asia. One store in the Netherlands is run directly by Inter IKEA Systems. (The Economist

Yes, all 333 IKEA stores franchise the concept. Complicated…

Click image to view cartoonist’s website.

IKEA first entered North America in 1976 with a store outside of Vancouver Toronto in Richmond BC. IKEA didn’t open a US store until nearly a decade later in 1985. My first visit to an IKEA was the Woodbridge VA location in August 1990. Since then I’ve shopped at five more locations.

In 28 years IKEA has gone from zero US stores to 38. Founded in Sweden in 1943, IKEA is a retail giant. After 70 years 333 stores exist. How does this compare to other retailers?

Apple opened its first retail store in Tyson’s Corner VA in May 2001. It now has, according to Wikipedia, 400 stores in 14 countries with 250 of those in the US. Obviously Apple is opening locations at a much faster rate than IKEA. But they’re in different segments, what about a more comparable company? Like Crate & Barrel:

By 1985, the chain had grown to 17 stores, and has continued to grow. In March 1995, it opened its first New York location (its 59th location), in Manhattan. After selling a majority stake to German mail order company the Otto Group in 1998, the company had financing to increase its rate of expansion. By 2002, it had grown to approximately 100 locations, and over 135 locations by late 2004.

Today there are over 170 stores in the United States. (Wikipedia)

Crate & Barrel, like Apple, is far more aggressive about opening locations. The point? IKEA takes its time. From March 2007:

Ikea, the world’s largest home furniture retailer, plans to acquire land in Joliet for a new distribution center that could eventually be as large as 1.4 million square feet.

The Swedish company has been searching for a site in the region for about a year, and recently signed a contract for a 72-acre tract in Joliet southwest of Interstate 80 and Illinois Highway 53, according to sources familiar with the matter. (Crain’s Chicago Business

The Joliet distribution center was supposed to open in 2009 but at this point it hasn’t yet.

Map showing IKEA's six existing, and one future, distribution centers in North America. Click image to see PDF from IKEA on distribution channels.
Map showing IKEA’s six existing, and one future, distribution centers in North America. Click image to see PDF from IKEA on distribution channels.

From the PDF linked above:

To meet the growing demand for products at the 48 IKEA stores in North America, IKEA locates its distribution centers in regions of the country in the United States and Canada where the company can optimize delivery of home furnishing products to the nearest IKEA stores.

In the U.S., this effort is aimed at developing a network that includes regional distribution centers in the East, Midwest, Northwest, South, and Southwest – as well as in Canada – for serving existing and future stores.

I’ve found no press release about the Joliet DC other than the original from March 2007. I’d guess once that facility is opened we’ll have a better shot at landing a store in the St. Louis region.

— Steve Patterson


Currently there are "19 comments" on this Article:

  1. JZ71 says:

    One, this doesn’t sound right, geographically: “with a store outside of Toronto in Richmond BC” – Toronto is in Ontario, Vancouver is in British Columbia. Two, given that the bulk of what IKEA sells is nonperishable, I’d suspect that the location of distribution centers plays only a secondary role in locating retail outlets. If the Joliet location were that critical, how have the two stores in the Chicago area managed to survive for as long as they have? Or, to put it another way, Kansas City and anywhere in Texas is further from Savannah than St. Louis. Retailers will invest where they see a profitable market and make the logistics work, there are simply other markets that appear to be more profitable (more low-hanging fruit) than St. Louis. And it’s not just IKEA, “we” don’t have Staples and we’re just getting CVS. Similarly, Tampa just got its first Container Store, Trader Joe’s only recently entered the Tampa and Denver markets (where customers there were likely just as “jealous” of us for having had those chains, for years), and neither has White Castle or Steak-n-Shake. The reality is that there will always be “desirable” stores in other cities that aren’t where you/we/I are currently – that’s what makes them “coveted”. If IKEA were as common as Lowe’s, it would no longer be either coveted or special, and no location would be as profitable as each of the 38 current US ones are now. Supply and demand, baby, supply and demand . . .

    • I think they’ve found ways to get product to the middle of the country to serve those markets but further expansion between the coasts will take another distribution center, the one they announced in 2007.

  2. moe says:

    Who cares? Because I sure don’t.

      • moe says:

        But on the positive side though Steve, I rarely find newspaper articles or sources about international affairs to be exact; i.e. the number of stores. I think the only major new sources that would correctly update the number of foreign stores would be the Wall Street Journal, the New York Times, Washington Post and the like. But at least they get the US stores correct.

    • tom jacobs says:

      Why do wisecrackers keep their bons mots coming at the risk of sharing their self-acknowledged ignorance? Sarcasm is their means of indirectly expressing aggression toward others, and uncertainty about themselves. Underachiever? Rapping these comments shields them from the vulnerability they fear, and it serves as a buffer by only letting the world see a superficial part of who they are. They’re into “impression management.” Anything here sound familiar, MOE?

      • moe says:

        No Tom it does not. Ignorance? Of what? Because I choose not to wet my panties over an IKEA? I’m very certain about myself, my wants and likes, and my finances. You can pontificate all you want Tommy. But I’m not the one that has to cut down others to make themself sound important (unless it’s in retort). Go away. You’re bothering the grownup.s

        • This is my blog and you have no business telling others to “go away.” If anyone should go away I’d like if to he you.

          • moe says:

            Well thats nice. I haven’t been the only one that has pointed out in the past how those with anti-steve positions are silenced or belitted. Nice way to have honest two-way converstation Steve and recognize other view points. You should re-read the order of the comments. I made and stand by the comment of who cares about Ikea because I do not. Plain and simple. I was attacked and yet you ask me to go away?

          • RyleyinSTL says:

            Dude, really?! Steve is always up for “anti-Steve” positions. He has a daily blog which allows readers to comment, make their positions known, discus them and ultimately bring additional value to the topic. Your reply, while no doubt expressing your most personal views on the matter, brought no additional content to the topic. If you don’t agree with Steve that is just fine, craft an intelligent response to his post, but to come in here and just take a big shit on him….not cool bro.

        • tom jacobs says:

          I actually made the decision to “go away” yesterday after your post. And I don’t wear panties, so I wouldn’t risk wetting them–for whatever reason. It’s boxers all the way, Moe! I like ’em hangin’ low, Moe! My comments to you had nothing to do with a desire to offer dogmatic opinions about you or your cynical motives. They were offered to put your comments into proper perspective. But I’m certain that at your age you know too well what I’m referring to–eh, Moe!

  3. tom jacobs says:

    Any given geographic area is obviously benefited when a new retail outlet sets up shop, but for the life of me I don’t understand the allure and hype associated with IKEA in terms of merchandise quality. In my opinion, there’s no question that “selection” is their main draw. But Big Lots offers a wide selection of merchandise, too, some of which may not deserve the effort to place it in a shopping bag and to carry it home. When we were still living in Alabama, my wife got the IKEA bug, and so we drove to Atlanta to purchase three new bedroom sets for the boys. In the “affordable” line, we both questioned if the construction would hold up to male adolescent activity, and we decided to delay the purchase and watch the sales at Haverty’s and local furniture outlets for what we considered to be better-built furniture. We later purchased the furniture at Haverty’s, and we paid about 10% more, delivered, than we would have paid at IKEA. That was 2-1/2 years ago, and the furniture is still going strong.

  4. Ike A. says:

    How much does the premise of this article matter given that the KC Ikea is being developed without a Midwestern distribution center? Slow news day I guess.

    • Expansion beyond already announced stores!

      • Ike A. says:

        By the same standard, Ikea wouldn’t have announced its KC store. Therefore, you’re speculating and this article means jack shit.

        • RyleyinSTL says:

          It seems to me that this blog is about a creative outlet for Steve’s interests, which includes but is not limited to, the betterment/retention of the Lou’s built urban environment. He doesn’t need a reason to post other than personal interest.

  5. RyleyinSTL says:

    Having previously lived in a city that landed an IKEA in 1978, I cannot attest to JZ71’s assertion that “If IKEA were as common as Lowe’s, it would no longer be either coveted or special.” When I left Edmonton in 2007, IKEA had been locally selling its pine/particle board furniture and Euro inspired housewares for 29 years. Born in 1979 I don’t know a world without IKEA, it has always existed, why then hasn’t it become as pedestrian to me as a Lowe’s?

    Quite simple really….IKEA has cornered the distribution/convenience/design/price/selection/quality market within their respective consumer space. An office desk, picture frame, dresser, lamp or glassware from IKEA, dollar for dollar, would generally be better packaged, better designed, better priced (or comparable) and of better quality than a similar item from Zellers (think Canadian Target). The difference isn’t huge mind you but it was enough that you just didn’t consider going anywhere else when looking for your lower priced home goods.

    IKEA isn’t for everyone. If you’re a stereotypical Midwestern type who lives on meat, potatoes and Bud (and who’s home is adorned with things like brass ceiling fans, ivory outlet covers and beige walls), IKEA is likely to edgy for you. For everyone else, it is where you go for your cheap stuff when you want it to have a bit of flare or just generally be less boring….which should be always.

    • JZ71 says:

      IKEA is coveted in St. Louis simply because we don’t have one – it has nothing to do with its quality, its price point or its design vocabulary. I’m old enough to remember when Coors was coveted east of the Mississippi (see Smokey and the Bandit). If one really wants something, and it’s not in the region and it can’t easily be shipped in, one has to leave town to get whatever. Whether it’s a pain in the ass or an adventure / excuse for a road trip is one of perspective. I can think of a couple dozen places that Denver has (and St. Louis doesn’t) that I’d love to see here. Do I “covet” them? Maybe. But that’s my point – there will always be retailers we’re familiar with from other areas, or we’ve heard have great stuff, that may (or may not) choose to enter the St. Louis market. We can speculate all we want about why (or why not) they will or they won’t open here, but it is something that’s pretty much out of our control – we’re not in the boardroom, making those decisions. And once they do get here, they usually lose some of their allure – if a road trip is no longer required, it’s less of a “big deal” to go shop there . . . .

  6. Joseph Schmitz says:

    Interesting that Steve wastes the first half of the article stating how other news sources misrepresent or misunderstand Ikea while in the second half of the article, he misrepresents Ikea by stating it opened its first North American store in Toronto. This article hits all the bases — media shaming, hypocrisy, and conjecture. Quality around here sure isn’t what it used to be.


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