world news - 21.02.2011
Ikea rival plans expansion in Canada
For many Canadians, Ikea is virtually synonymous with affordable,
assemble-yourself furniture. But can the ambitious expansion plans of a
virtually unknown Scandinavian rival change that perception? Jysk is a Danish retailing giant that boasts more than 1,700 stores
in 34 countries worldwide, including outlets in such far-flung locations
as Kazakhstan and Albania. But, even though the chain has opened more than 40 stores across
Canada since its arrival in 1996, most Canadians have likely never heard
of them. Jysk hopes to change that soon, with plans to open 20 new stores in Canada every year for the next three years. It won't be a hard sell, considering Jysk stores will strike Ikea customers as very familiar. "It's sort of the same concept as Ikea where you can buy it today and
take it home today," Jysk director of advertising Lynne Williams said
in a phone interview from the company's headquarters in Port Coquitlam,
B.C. The major difference is, Jysk aims to sell its products a little cheaper. "Our theme is quality for less," Williams explained, noting that
Jysk's product offering also includes a variety of budget-priced,
flat-pack furniture customers can put together themselves. But the Danny bookcase on sale at Jysk, which is virtually identical
to Ikea's iconic Billy shelf, sells at a 40 per cent discount. Poor man's Ikea? Rotman School of Management professor David Soberman says the idea of a poor man's Ikea has a broad appeal. "Ikea's very successful, with a very unique format that's basically
revolutionized how people buy furniture throughout the developed world,"
Soberman told CTV.ca, suggesting the success of that formula virtually
guarantees copycats. "There's a saying in business, 'If you see a winning combination
don't mess with it.' But there's another adage that says, 'If you see a
winning combination copy it.' And that's basically what Jysk is all
about." But Jysk hasn't recreated the Ikea concept wholesale, opting instead
for smaller, no-frills stores that compete with the Swedish rival on
product and price. So, the typical Jysk store footprint covering 2,000 square metres is
dwarfed by the 25,000 square metre layout of an average Ikea. "That gives them an opportunity to go into markets where Ikea would
assess that the market's not enough to justify a full Ikea store,"
Soberman said. As a result, communities like Saskatoon or Guelph, that are too small
to accommodate the sprawling suburban footprint of a typical Ikea, can
look forward to a local source of Scandinavian furniture in the near
future. "That cuts both ways," Soberman added, noting that Ikea's success is
also rooted in its wide variety of products, most of which are always in
stock. "The disadvantage with being smaller is you don't have quite the product line that Ikea has," he said. But, rather than matching the entire range of 11,000-plus products
found at Ikea, McGill University marketing professor Robert Soroka says
Jysk can succeed by offering consumers less. "They don't have to be the lowest priced on every SKU (stock-keeping
unit), but they do have to have the sharpest price on their highest
profile SKUs, because that's where Jysk is going to make an impact." "Nobody wants a product that's not going to last," Soroka added in a
phone interview from Montreal. "Despite the fact that your consumer is
coming to you for a low price, you're still trying to establish a
long-term relationship. "The retailers that win, like Ikea, are the ones that keep the customer coming back." Enough room for both? Ultimately, Soroka believes there's more than enough room for both players. "Jysk and Ikea typically do not go head-to-head, they're both
low-cost alternatives, and the fact is this particular market,
particularly in the urban markets across Canada, is not saturated," he
said in a phone interview. "They're typically not in close geographic proximity so there's
enough to go round," Soroka said, describing the crammed parking lot
that typically greets Ikea shoppers arriving at the store on a Saturday
morning. "When you see it, you realize there's room for one more competitor in the landscape." That may sound like sacrilege to die-hard Ikea aficionados worried
their days spent wandering the maze-like corridors of an Ikea, discount
hot dog in hand, may be numbered. But Soberman insists there are already competitors vying for the same
market as Ikea -— and they have more reason to worry than the Swedish
giant. "There's a lot of easy-to-put-together furniture," he said in a phone interview from Toronto. "You can buy this stuff at Canadian Tire, at Wal-Mart, Zellers. And
the real issue is if a company like Jysk comes in you may find some of
these other companies start to restrict their product line." The threat lies in the potential for Jysk to become a
'category-killer' in the way big-box electronics retailers have grabbed
the lion's share of that market away from traditional department stores,
for example. While that suggests retailers are poised for a fight, Soroka says that should be a boon to anyone shopping for furniture. "I think that you're going to see a lot of strong competitors vying
for the love of this particular market and that love will be expressed
with extremely low prices," he said. And the analysts agree that, with the arrival in Canada of U.S.
'discount-chic' retailer Target looming on the horizon, our retail
landscape is set for a shakeup. "Target is the breath of fresh air that Canadian consumers have been
waiting for," Soroka said, considering the steady decline of Zellers and
the now-ubiquitous presence of Wal-Mart stores from coast-to-coast. "It's not going to take much to draw consumers to the new shopping experience." Williams says Jysk is ready for the challenge. "It's going to be competition in the market, for sure, but if you get
something like a Target it tends to draw shoppers in," she said. "So all retailers might benefit from that."
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