Ikea pivots to city centres as 'big box' era stalls in the UK

"Ikea is accelerating its shift towards smaller city-centre stores in Britain, as rising property taxes and changing shopping habits blunt the appeal of traditional out-of-town megastores. Peter Jelkeby, the outgoing chief executive of Ikea UK and Ireland, said the Swedish retailer would focus future expansion on compact urban formats after strong trading at its new Oxford Street flagship and central Brighton store."

"The strategy represents a clear move away from Ikea's historic "big box" warehouse model, which dominated retail parks for decades and defined the brand's British expansion from the late 1980s onwards. While the group has no immediate plans to close existing large stores, Jelkeby confirmed that Ikea does not intend to open any new megastores in the UK. "We see more potential in opening more smaller stores like Oxford Street and Hammersmith," he said. "That's where customers are, and that's where growth is.""

"Jelkeby acknowledged that the rising cost of business rates has played a role in the strategic rethink. Larger retail units typically attract far higher rateable values, leaving operators exposed to disproportionately large tax bills. Upcoming reforms will intensify that pressure further, with a new surcharge on commercial properties with a rateable value above £500,000. While intended to support smaller businesses, the changes will increase the burden on supermarkets, department stores and warehouse-style retailers."

Ikea is shifting its UK expansion toward smaller city-centre stores after strong trading at its Oxford Street flagship and central Brighton store. The retailer is moving away from the historical big-box warehouse model and does not plan to open new megastores, while existing large stores will remain open for now. Rising business rates and an upcoming surcharge on properties with rateable values above £500,000 increase costs for large retail units. Ikea is also trialing mid-sized retail-park stores in Harlow, Norwich and Chester as part of a more flexible bricks-and-mortar approach.

Read at Business Matters