TORONTO — You’d think home improvement projects would sit on consumers’ back burners when the economy is weak, but the industry has been thriving thanks to cocooning Canadians, and Ikea is one of the trend’s biggest beneficiaries.
“Canadians are not travelling like they have done in the past,” Stefan Sjöstrand, president of Ikea Canada, said in an interview at the company’s vast store in west Toronto.
“When the dollar is weak, they stay home, and when they stay home they invest in their homes and spend more on home furnishings and (do-it-yourself projects). When you lead with the lowest price, it’s a very strong position given the market situation we are in right now. Canadians like value for money. We are in a very good position.”
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Ikea Canada, which has annual sales of $1.8 billion, jumped 15 per cent between September and April compared with the same period a year earlier.
That’s more than double the rate of overall growth of 6.8 per cent in the retail home furnishings sector during that period, and comes after a fiscal year in which sales grew 10.4 per cent as the retailer continues to pick up steam.
In the 12-month period ending in March, Ikea increased its market share of Canada’s $22 billion home furnishings market to 8.5 per cent, from 7.7 per cent a year earlier, according to data from Fusion Retail Analytics and Statistics Canada.
It’s unlikely the growth trajectory will slow down. The retailer, which opened its first Canadian outlet 40 years ago, has 12 large warehouse stores and last year opened five smaller “pick-up and order” locations, with a sixth opening soon in Kitchener, Ont. Last year, Ikea announced plans to double its store count in 10 years.
Web sales, which now amount to $103 million a year, are likely to get an even bigger boost when the company debuts its first a “click and collect” area at its Winnipeg store this fall.
Currently, any purchases customers make on Ikea.ca are delivered to their homes, with no option to pick up online purchases at stores.
In the meantime, people are using the Internet frequently to check store stock at the closest Ikea, Sjöstrand said.
Last year, Internet-savvy Canadian customers made 5.9 million online checks to see what stores had specific goods in stock. “We are the highest Ikea country in the world for (customers) doing stock checks,” he chuckled.
Jim Danahy, CEO of Toronto-based retail advisory firm Customer Lab, said home improvement and furniture retailers alike have benefited from urbanization which has seen many former suburb-dwellers move into smaller spaces in the city core. “The re-urbanization of Canada is particularly great for Ikea, which has always been well-suited to people looking for that apartment-sized, European-style furniture,” he said.
Bruce Winder, partner at the Toronto-based consultancy Retail Advisors Network, said the Swedish furniture giant shares a product and price reputation similar to that of compatriot clothing retailer H&M.
“Any time you combine great style and value in this economy it is a winning combination for the middle class,” he said.
Winder credits Sjöstrand, who took the top job at Ikea Canada in 2014, with revitalizing the retailer’s culture in this country.
“In an environment where retailers have cut costs and staff morale can be low, Ikea creates a winning environment for its staff and they treat them very well and at the same time they have intertwined the environmental goals and message into their business model.”
Another asset is that the retailer creates and designs many products based directly on customers’ needs and feedback, Winder said.
“Ikea does home visits at Canadian homes. They meet the owners and walk through their lives with them, and even (Sjöstrand) goes along for those,” Winder said. “It’s one thing (for a retailer) to get someone’s perspective in a focus group, but it is very much another thing to get into people’s houses and ask them about their priorities and needs. They design products from the ground up that meet what these folks want and need.”
Sjöstrand, who worked for years in product development at Ikea before he took up executive roles with the retailer in Europe, radiates enthusiasm when he talks about pretty much any aspect of the business, but none so much as when he talks about design. Ikea is able to keep its prices on its 9,400 products low by designing all of them in-house and making the most of acquiring underutilized production capacity during quiet times at manufacturing facilities.
Holding up a 1L glass carafe, Sjöstrand launches into a detailed account about the thought processes behind its creation: how well a dish brush fits inside, how it should be suitable for cold and hot liquids so the holder won’t burn his hand on it, and why the lid is made from sustainable cork.
“I love it, I have five of them at home,” he says, before placing it back onto a conference table. “You can wash this 365 days a year. We do it all for $4.99.”