Ikea to open 17 new U.S. stores in $2.2 billion expansion

Ikea plans to open 17 new stores across America in a major push to expand its U.S. business, the Swedish home goods company announced Thursday.

The retailer will spend more than $2.2 billion over three years growing its U.S. presence, with a focus on entering new markets in the South, the company said. Ikea will also work to improve its ability to fulfill and deliver customer orders in a bid to capture greater market share. 

The company didn't disclose where around the country it would build the new stores. The locations will include eight full-size stores and nine "Plan & Order" points, an Ikea representative told CBS MoneyWatch. Ikea expects the additional outlets will add create a total of 2,000 jobs.

Ikea currently has 51 stores in the U.S. The new openings will form part of a multi-phase plan to expand the retailer's footprint in the U.S. over the next decade, Tolga Öncü, head of IKEA Retail, Ingka Group, said in a statement. After the expansion, the U.S. will likely become Ikea's largest market, surpassing Germany, he said.

"The U.S. is one of our most important markets, and we see endless opportunities to grow there and get closer to the many Americans with affordable products and services," Öncü said.

Adapting to Americans

Ikea is aiming to diversify its global revenue and boost profits as lingering inflation causes shoppers to tighten their purse strings in some parts of Europe. In the U.S., that means adapting the company's business model to the needs of American consumers, in part by giving people more delivery and pickup options, the company said.

More than half of the new U.S. stores will be Plan & Order points, smaller outlets dedicated to kitchen, bedroom and living room projects, according to Idea. Those locations will offer a more intimate shopping experience, including free appointments with the company's design personnel.

"We know U.S. customers have a strong desire for more ways to shop and experience IKEA, and this growth plan will allow us to meet that need," U.S. CEO and Chief Sustainability Officer Javier Quiñones said in a statement. 

The company will also create 900 new pick-up locations where customers can collect their online orders. Today, about 25% of overall furniture sales and 20% of all retail sales in the U.S. take place online, UBS recently found. The investment bank expects more than one-third of furniture sales to be online by 2027.

Ikea's move to strengthen its delivery services could give its business a boost in the U.S., where the infrastructure to connect rural and suburban areas to mega stores is lacking, Neil Saunders, managing director at data analytics company GlobalData, said. 

Big stores "work well in population-dense countries like the UK, but are less effective in the U.S. where, outside of cities, people are more scattered and drive times can be extensive," Saunders said in an email.

Despite the unique challenges that exist in American markets, Ikea has managed to grow, with total sales modestly rising last year despite increased costs and supply challenges, according to the company's 2022 Annual Summary. The retailer's U.S. operations had sales of $5.9 billion last year, with a nearly 19% increase in e-commerce sales, the summary shows. 

Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.