The only thing bigger than New Zealand’s first IKEA megastore is the hype surrounding its opening.

Authorities braced for traffic snarls around the Auckland site amid predictions 20,000 shoppers would rush to the store on day one. The Prime Minister was among the crowd of customers inspecting the 34,000 m² site, which includes a showroom, market hall and self-serve warehouse.

But while the launch brought excitement for shoppers, it created uncertainty for SME owners wondering how the Swedish giant would impact their businesses. The answer is optimistic..

There Are Positive Signs From The Overseas Experience 

IKEA has almost 500 stores on six continents – enough to give Kiwi businesses an idea of what may be to come. A study of three outlets in Sweden found retailers located within 1 km of a new IKEA saw an average seven per cent increase in revenue, while shops selling complementary homewares achieved 12 per cent growth. There was a decline in sales at businesses 2-5 km from the store.

Separate Swedish research detected a boost in activity for non-homewares retailers and accommodation providers near IKEA stores while, in Portugal, a survey of SMEs found 45 per cent noticed no impact after an outlet opened nearby and only 4.3 per cent reported a negative outcome.

The Timing Might Be Right For the Kiwi Economy

IKEA’s entry into New Zealand comes as green shoots start appearing in the economy. 

On the sentiment side, November’s ANZ-Roy Morgan New Zealand Consumer Confidence Index climbed to 98.4, the highest since June, while the nation’s peak retail body predicted the recent interest rate cut may encourage spending. An analysis of Black Friday transactions found that although spending was 6.2 per cent down on last year, it was still the busiest shopping day of the year.

Business Consultant Chris Wilkinson told RNZ he expected shoppers would loosen their purse strings. “We feel that IKEA is going to inspire people, it’s going to get them out shopping, and it’s going to make them think about shopping in wider environments as well. It will lift all the boats.”

Smart SMEs Can Spot Market Advantages

Retailers and cafes around IKEA’s Sylvia Park location have expressed hopes they will benefit from the increased foot traffic their new neighbour is expected to bring – a phenomenon known in retail as the agglomeration effect.

There are also opportunities for SME owners as shoppers, with an expected uptick in  hospitality businesses sourcing glassware and furnishings.

Further afield, If the overseas experience is repeated here, IKEA may spark a wave of interest in home renovation, decorating and refurbishment that could flow through to SMEs. Businesses offering specialised fittings, custom joinery and mid-range to high-end decor may be able to capitalise as more Kiwis enter nesting mode. Shops that set themselves apart with niche or artisanal offerings are also at an advantage.

There may also be an opportunity for tradespeople to add assembly services to their list of offerings, once the novelty of assembling flat-packed furniture wears off.

Get Ready For Some Competition 

Some businesses are expected to feel pressure in the new retail landscape, particularly those selling low-range mass market furniture, while others may feel the pinch until the economy improves further. Says Chris Wilkinson: “We think it’ll probably take business from other discretionary categories. It could impact aspects like experience, hospitality, apparel.”

Although IKEA is in Auckland, its reach extends nationwide, through the establishment of 29 collection points that enable people to pick up online purchases. This opens up businesses in other regions, including small towns, to competition they may not have expected. 

However, Prime Minister Christopher Luxon denied competition was bad for small businesses. “They should step up and compete and I know they will,” he said outside the IKEA store. “I know there’s a lot of retailers that are actually welcoming the competition. It’ll make them bigger and be a good thing for New Zealanders.” 

IKEA’s Australia and New Zealand CEO Mirja Viinanen told NZ Herald the company was committed to being a good neighbour. “When it comes to the competition, we are here to work with you together, to create a better everyday life for the many people, thinking about the consumer and thinking about the good prices and good quality. So, if we are competing on something, let’s compete on the customer service and customer experience.”

To get a headstart, businesses could consider:

• Find your niche: to avoid competing, identity which of your products IKEA doesn’t sell and promote those
• Bundle to boost spend: combine items to attract customers who like to buy things in sets
• Show, don’t tell: make social media content showing your products in homes rather than on shelves to replicate the showroom feel people buy the vibe, not the item.
• Go regional: consider logistics partnerships in other regions to match IKEA’s collection points to the successful adoption of the National AI Plan.”
• Boost your online store: people outside Auckland will research purchases on IKEA’s website, so ensure your site is as easy to use