Ikea and Ingka Centres’ $260 million bet
In our current climate, no one knows when life will return to “normal.” Or, for that matter, what our “new normal” will even look like.
Because of the uncertainty, it’s hard to make big decisions for the future. However, that isn’t stopping Ingka Group, the parent company of Ikea, from looking to the future with confidence and expanding their repertoire. In fact, they are about to open a $260 million mall in downtown San Francisco in the autumn of 2021.
In this article written by Mark Wilson, he discusses what this mall will entail, and why expanding business during a global pandemic could actually be a good idea.
Ingka’s $260 million bet doesn’t include actually building a new mall; rather, they are moving into a 6x6 building that was finished in 2016, which has since laid dormant (save for a parking garage at the bottom). For Ingka, this space fits perfectly into their $8.6 billion investment in the future of their company, which was first announced in 2018. This announcement included expanding Ikea stores into major cities such as Chicago, New York, and Los Angeles, rather than focussing solely on smaller, suburban locations. As Wilson states,
physical retail stores are still important to Ikea as a way to experience its products.
So what exactly will be inside this $260 million mall (besides an Ikea, of course?) As it turns out, besides it’s $35 billion furniture business, real estate is actually Ingka’s main business plan. An Ingka’s Centres spokesperson stated that the new mall will eventually serve as a mixed-use ‘meeting place’ that could include retail, residential, hotel, flexible working spaces, [food and beverage], community services, etc...we will work with San Franciscans to develop the space based on their wants and needs.
With companies, businesses, and retail brands alike all over the world struggling to cope with the impact of the global pandemic, some could say that investing in the expansion is a risky move. However, with Ikea’s e-commerce platform struggling, especially during COVID-19, it makes sense that Ingka would look further afield to continue to build their brand in a physical and tangible way, incorporating a creative and inventive solution during an uncertain market.
We of course understand the recent pandemic has had an impact on all cities and retail environments, a spokesperson stated, but we are confident in our future...our strategy is to be close to where many people live and work, and we believe in the long-term potential for 6×6.
In fact, ironically, the plunge in the U.S. market has provided real estate with many opportunities. CEO of Mexican Grill restaurant Chipotle Brian Niccol told Fast Company that it’s an ideal time to expand, despite revenue being down 5% since 2019. Niccol suggested that we will soon see Chipotle restaurants cropping up in high-end locations and neighbourhoods, with it’s positive and dependable reputation making it tempting for future landlords.
It’s clear that amongst all the jargon and struggles that this global pandemic has brought, Ingka’s Centres’ are deciding to make lemonade out of lemons - showing us that even with an unstable market, with a bit of creativity and planning, risk-taking can go a long way.
What do you think about this idea? Do you think now is a good time to expand? Let me know below in the comments.