Future IKEA Somerville Advances as Developer Begins Demolition on Site of Swedish Retailer's 2nd Boston-Area Store

SOMERVILLE, MA, Sep 19, 2008 (MARKET WIRE via COMTEX) -- With company representatives, local officials and community leaders on-hand, IKEA, the world's leading home furnishings retailer, joined Assembly Square Mall owner Federal Realty Investment Trust (NYSE: FRT) as the developer initiated demolition at the site of the future IKEA Somerville store. Demolition of buildings within the Assembly Square area will allow for construction of Federal Realty's 145-acre planned 'Assembly on the Mystic' development, including the IKEA Somerville store. Until IKEA Somerville opens in 2011 as the 2nd IKEA store in the Boston area and 38th in the United States, customers can shop at IKEA Stoughton or www.IKEA-USA.com.

The 340,000-square-foot future IKEA Somerville, with 1,350 parking spaces comprising two levels of parking below the store, will be built on 12 acres previously occupied by buildings within Assembly Square, southeast of the Assembly Square Mall, east of Assembly Square Drive and the MBTA's Orange Line. Federal Realty and IKEA also will be contributing towards the creation of a T-station along the Orange Line. IKEA Somerville will reflect the unique architectural design for which IKEA stores are known worldwide, and will employ approximately 500 coworkers.

"Today's demolition event is the result of collaboration and hard work by Mayor Curtatone, Federal Realty and key interest groups in Somerville who have worked towards the common goal of opening IKEA Somerville as part of a vibrant, transit-oriented mixed-use development," said Doug Greenholz, U.S. real estate manager for IKEA. "We now look forward to closing on the purchase of the land next year and then beginning construction so we can open IKEA Somerville in 2011, and grow our Boston-area presence that began two years ago with the opening of IKEA Stoughton." . . . more

Destination retailers feel gas price pinch

CHICAGO -- Consumer spending is down and gas prices are up. That's bad math for the scores of destination retailers across the country that want customers to fill up the tank for a gas-guzzling day of retail therapy.

So to cajole shoppers into stores, some of the nation's chains are changing marketing strategies, launching in-store classes and drumming up other special events aimed at getting road-tripping shoppers to pump up sales.

Customers at Bass Pro Shops drive an average of 100 miles to reach the company's 50 locations and many are known to drive up to 300 miles each way to spend time at the massive outdoor supercenters.

But with the average price of a gallon of regular gas above $4, getting even the most devoted customer to make the trip is becoming increasingly difficult.

That's why the Springfield, Mo.-based chain is launching a slate of events this weekend, offering outdoor skills workshops, s'mores-making, scavenger hunts and foam shooting competitions for shoppers.

Bass Pro Shops spokesman Larry Whiteley says foot traffic in stores is falling, but the company hopes this weekend's events give customers more than just one reason to make the drive.

"We're teaching them how, for less than $100, they can have their own camping outfit and they can go to a lake or a campground or they can use it in their own backyard," he said.

As gas prices rise and food prices soar, the American shopper is scaling back: driving less, postponing major purchases, putting off vacations, cutting back on their shopping expenses.

That means those shoppers who do make purchases are making them closer to home.

It's a trend George Rosenbaum, co-founder of Leo J. Shapiro and Associates, calls a retailing transformation.

"Any store that has significant dependence on drawing traffic from more than 30 miles is going to have pressure on it," he said.

WSL President Candace Corlett worries about what kind of long-term effect the changing shopping patterns could have on the nation's retailers _ particularly those such as Ikea, Cabela's and far-flung outlet malls _ whose bricks-and-mortar business models requires shoppers to spend hours in a car.

"Not only is it far away, so it's a gas-guzzling trip, they're selling merchandise that's a purchase that can be postponed, and they're the type of retailers where there's too much temptation," she said. "If you go into Ikea with nothing in mind, you come out hundreds of dollars later. This isn't a time when people are proud to be buying lots of stuff."

Just ask John Wallace and his wife Margot.

The Oliviehain, Calif. residents, who visited a Cabela's sporting goods store in Nebraska during a cross-country road trip to see family, say they can still afford the nearly $5-a-gallon gas in their hometown. But they're still bundling shopping trips into fewer stops, sharing rides with friends for longer journeys and scrapping visits to other faraway destinations altogether.

"I think everybody's trying to become a little more wise and savvy," said Margot Wallace, 50.

But not all destination retailers are feeling the squeeze.

American Girl stores _ veritable wonderlands for doll-loving girls and their parents _ are seeing increased traffic this summer. Stephanie Spanos, a spokeswoman for the dollmaker owned by Mattel Inc., attributed the increase to the movie "Kit Kittridge: An American Girl," showing in theaters nationwide.

"Given the timing, we're seeing probably a lift in store traffic," she said.

At the Mall of America in Bloomington, Minn., foot traffic is up, too _ thanks largely to the 1.5 million international shoppers who were lured to the mega-mall in the past year by the weakened U.S. dollar.

But officials say they're still changing their advertising strategy, spending more money in markets a day's drive from the 520-store mall. They hope the targeted campaigns offset any potential decrease in far-flung shoppers deterred by the high price of fuel.

"We're always out there hustling to get the word out," said spokesman Daniel Jasper. "But we've been a little more aggressive this year, to be honest."

The same goes for Cabela's Inc., whose stores routinely draw shoppers from three hours away.

The Sidney, Neb.-based retailer known for its elaborate, one-of-a-kind stores is launching a new display advertising campaign with a gas-saving theme, encouraging shoppers worried about fuel prices to scrap in-store visits for online or catalog orders.

"We can hopefully direct customers to those channels so they don't have to fire up the car," said spokesman Joe Arterburn, who said the company is likely drawing fewer in-store shoppers from great distances. "Everyone is tightening their belt."

Source: Washington Post

IKEA feels impact of housing slowdown

NEW YORK - Mobs of fans greeted the opening this week of build-it-yourself furniture chain IKEA's first store in New York City - but the fervor is masking shoppers' underlying frugality.

Even the most loyal followers of the Swedish leader in low-priced but sleek home decor are thinking twice about buying ready-to-assemble bookshelves or woodblock tables amid a housing slump that has lasted almost three years and the soaring costs of food and gas.

"I am definitely not shopping big items. And I am focused on sales," said Jewell A. Staley, a real estate investor who loaded her cart Wednesday at the new Brooklyn store with $10 lamps and a $29.99 bistro table. "I am spending $100 on gas every two days."

The man behind the company's global expansion, CEO and president Anders Dahlvig, told The Associated Press that the housing downturn has led to a global sales slowdown at IKEA as shoppers do less impulse buying and focus on price. And he doesn't see any economic recovery for another two years.

"A lot of things are going in the wrong direction," Dahlvig said, rattling off challenges like soaring inflation, the downturn in the job market and tighter credit. Global sales growth slowed to 11 percent in the fiscal year ended Aug. 31, compared to previous increases of about 15 percent.

The hardest-hit countries are the U.S., Germany and Britain, but Dahlvig said he's seeing business in Spain and other European countries starting to slow down as well.

Still, Dahlvig believes there are big opportunities for the privately held IKEA Group, which operates about 250 stores in 31 countries. He said IKEA has gained market share in the U.S. from home furnishings rivals like Levitz Furniture (other-otc: LVFIQ.PK - news - people ), which liquidated, and Linens 'n' Things Inc., which filed for bankruptcy protection in early May.

Instead of scaling back on overall expansion, the company is shifting its emphasis toward developing markets like China, Russia and Eastern Europe, while staying tough on prices and cutting expenses.

"Slowdowns in the economy are not forever," Dahlvig said. "It's better to stick with a strategy than panic."

The U.S. housing downturn has hit home furnishings retailers the hardest, however, as a decline in home sales stifle consumer demand to fill their new houses with curtains and new tables. The home furniture and furnishings category accounted for 27 percent of the total 4,600 store closings in 2007, according to the International Council of Shopping Centers.

"IKEA is not immune to the housing downturn, but they are in a sweeter spot than other retailers," said Shilpa Rosenberry, a senior consultant at WSL Strategic Retail. "Shoppers will spend on home given the right opportunity."

Janet Hoffman, managing partner of the North American retail practice of Accenture (nyse: ACN - news - people ), noted that the IKEA experience - along with its stylish low-price merchandise - sets it apart from other merchants. "You just don't dash in and out of the store," she said.

IKEA offers less-expensive furniture, in designs from modern to traditional, because most of what it sells requires assembly and is flat-packed, saving the company money in transportation and storage costs. Sofas range from about $399 in cloth to $1,400 in leather, while accessories include $20 mirrors, $7.99 woks and $3.99 throws in bright colors. The stores also feature cafeterias that serve Swedish meatballs and have Swedish food markets.

While IKEA faces increasing competition from discounters like Wal-Mart Stores Inc. (nyse: WMT - news - people ), which has freshened up its home furnishings sections, retailers can't match IKEA's breadth of offerings. A typical IKEA store features about 10,000 items. The Brooklyn store offers 49 room vignettes and three model homes, tailored to apartment living.
In the U.S., IKEA's second-biggest market behind Germany, sales increased a respectable 10 percent in its last fiscal year, but below the 21 percent pace of the previous year, according to Pernille Spiers-Lopez, president of its North America division. The U.S. market accounts for about 10 percent of total sales, which reached 21 billion euros, or about $32 billion, in its last fiscal year.

Spiers-Lopez said IKEA is seeing business lag in California, Arizona and Michigan - markets that have taken the biggest blow from the housing slump. But she noted that soaring gas prices are also affecting shoppers as well.

"The purchases are more planned," Spiers-Lopez said, adding that there's less impulse buying.
Shoppers are also choosing the least expensive offerings in a category, she said. For example, IKEA's lowest-priced couch, which sells for under $400, is faring well, while $79 bookcases are doing better than more expensive options. And while categories like lighting, cookware and tableware are sluggish, IKEA is seeing solid gains in furniture sales - indicating that people are careful where they shop for big items.

Alexandria Rosario of Brooklyn, who plans to move out of her parents' home, just spent $3,500 on a bedroom set at a small store, but saw an IKEA bedroom vignette that totaled $1,000 with accessories. She said she'll be back to buy.

"It's stylish, affordable, retro. It's perfect," she said.
But Aida Perez of Brooklyn was buying just a few big plastic organizers to store items for her three children.

"I'm buying stuff that I can use over and over," she said. "Maybe when I have some more money, I will come back to shop some more."

Source: Forbes.com

First Ikea store in New York City opens

The Swedish furniture retailer Ikea's latest U.S. store opened Wednesday in the Red Hook section of Brooklyn - the first in New York City, the 35th in America and the only one with views of Manhattan and the Statue of Liberty.
Eager shoppers had lined up as early as Monday outside, hoping to take advantage of free furniture and other giveaways for the first customers. The arrival of the store, with its bright blue-and-yellow exterior, was years in the making amid concerns about the traffic impact the 346,000-square-foot (32,144-square-meter) behemoth would have on the history-steeped neighborhood on the Brooklyn waterfront that still has cobblestone streets. Neighborhood activists worried that redevelopment was turning a district that dates from the early days of Dutch settlers and was a shipbuilding center for more than a century into an area overrun by luxury apartments and big stores. But on Wednesday, company representatives were joined by elected officials and others to welcome the store's opening.

"We are thrilled with the reception afforded us here in Brooklyn," said Joseph Roth, director of public affairs for Ikea in North America.

Roth said that while the store had space for 1,400 cars, there was also an emphasis on using public transportation to get there. Two city bus lines serve the area, and Ikea is offering free shuttle service from three of the nearest subway stations and a free ferry service from lower Manhattan. The store is like every other Ikea in the products it carries, but there are a couple of things that make this location unique, including the 6.5 acre (2.63 hectare) esplanade open to the public. The Brooklyn store will offer home delivery of furniture, as does every Ikea, but it will also offer a service that is only found in this store - customers buying small household items can arrange for a courier service to deliver those as well. It's a reflection of the reality of urban life in New York, Roth said.

"To take it on a bus, it's not as easy as having someone taking it home for you," he said.

Source: Plain Vanilla Shell