Ikea has taken its next steps in the battle for supremacy in the German home furnishings market with plans to launch shops in the Ruhr.
The Swedish retail giant intends to open six stores in North Rhine-Westphalia (NRW), with the primary focus being the Ruhr, a region consisting of 53 industrial cities and municipalities with some 1.14 inhabitants per square metre (compared with the German average of 0.23).
In addition to new stores in Wuppertal and Bottrop as well as in the Bochum/Herne and Castrop-Rauxel areas, Ikea is planning replacement branches for Essen and Kaarst.
The business estimated its spend at around €400m (£297m) in NRW, with about €250m (£185m) of this channelled into the Ruhr over the next three years.
Ikea’s long-term goal in Germany is to increase its market share from around 13% to 25% within the next 10 years. Growth will be driven by the addition of some 32 stores (bringing its count to a total of 70) as well as a significant extension of its online reach.
In a decade’s time, Ikea envisions annual sales of approximately €8bn (£6bn), up from €4.12bn (£3bn) it reported for the last fiscal year ended August 31, 2014.
German market already crowded
Ikea’s drive for market share will almost certainly push out other furniture retailers, as the market is seemingly set on consolidation.
The top 10 home furnishing retailers achieved sales of about €15bn (£11bn) last year, equivalent to almost 50% of the total turnover of the German furniture and kitchen trade, according to figures from the furniture fair in Cologne in January.
Over the last decade, retail space in the sector increased 10% to around 247 million sq ft. As such, further expansion of sales area – as in the case of Ikea – is no longer necessary, according to the chief executive of furniture trade association BVDM, Thomas Grothkopp.
Alongside Ikea, there is an Austrian furniture retailer that is also seeking to ramp up its market penetration in Germany. XXXLutz, a rather secretive multinational and multi-banner furniture specialist, recently acquired a 50% stake in the €300m (£222m) Zurbrüggen business in northern Germany.
Some time ago, XXXLutz also took a significant chunk of the insolvent Max Bahr and Praktiker estate.
Meanwhile, the threat from online is looming as businesses such as Rocket Internet-owned Home24 are looking to grab their share in a category still dominated by bricks-and-mortar operators.
- Niklas Reinecke, retail analyst, Planet Retail