Ikea Canada racked up record numbers in 2016, with sales rising 14.2 per cent to $2.05 billion as the home furnishings retailer saw strong gains in both its store and online operations.
It marks the second year of double-digit growth for the subsidiary of Netherlands-based Ikea Group in the fiscal year ended Aug. 31, and it more than doubled the 5.1 per cent pace of sales growth in the overall home furnishings retail category in Canada for the same period, according to data from Fusion Retail Analytics.
“Ikea has products that will fit every budget and it is known for that,” said George Minakakis, chief executive at Toronto-based consulting firm Inception Retail Group. It’s an advantageous strategy given that the redecoration cycle has sped up since the 1980s. Whereas households used to hold on to furniture, dining sets and décor for decades, consumers now purchase such items with a much shorter life span in mind.
“When you look at furniture as a category it is pretty much disposable,” Minakakis said. “People figure that they do not want to overpay when they can buy something that is in style for a good price.”
Ikea has also carved a niche for itself as an outfitter for small spaces, he said, capitalizing on the urbanization trend in Canada, he added. “As we move more and more to condos, it is becoming increasingly important.”
Ikea, the world’s largest furniture retailer with 391 stores in 48 countries, also enjoys a strong pricing advantage over competing retailers due to its in-house design and economies of scale.
The retailer, which opened its first Canadian store in 1976, currently has stores in British Columbia, Alberta, Winnipeg, Ontario and Quebec, and last year announced plans to double its current count of 12 large stores to 24 by 2025. Ikea also operates six smaller “pick-up and order” outlets in Ontario and Quebec that are one-tenth or less the size of an average store and serve smaller markets.
Ikea Canada also reported Tuesday that its online sales rose 41.3 per cent in 2016, while its in-store sales were up 12.7 per cent and customer visits climbed five per cent. That followed a strong 2015, when Ikea Canada’s sales rose 10.4 per cent.
Over the course of its fiscal year, Ikea Canada grew its market share in home furnishings by one per cent to 9.4 per cent, according to Fusion Retail Analytics. That’s up from a 5.8 per cent share in 2013.
Strong sales of home furnishings and appliances have been fuelled by the country’s robust housing market. Home prices were up 14.6 per cent year over year in October, according to Ottawa-based Canadian Real Estate Association, amid the lowest housing inventories in almost seven years.
In addition to Ikea, sales have been stellar at Leon’s Furniture Ltd., a Canadian retailer that also sells electronics and major appliances. In the nine-month period ended Sept. 30, Leon’s reported a systemwide sales increase of 5.2 per cent to $1.8 billion. Leon’s has occupied a bigger slice of the market since it purchased rival chain The Brick in 2013, and reported sales of $2.44 billion at its 300 stores in 2015.
Source: Financial Post