(Updates with comments on shop design in 15th paragraph.)
June 30 (Bloomberg) -- Ikea became the world’s biggest home-furnishings retailer by getting shoppers to drive to sprawling hyper-centers on the outskirts of cities from Stockholm to Shanghai. From today, residents in Hamburg can just walk in off the high street.
The Swedish chain opened its first city-center store in the district of Altona, the most westerly of Hamburg’s seven boroughs, in a pilot project targeting a rising number of urbanites who dread the long haul to its traditional outlets with their distinctive blue and yellow design. The store opening, which is costing the company 80 million euros ($109 million), is an experiment for Ikea, breaking new ground in its largest market, said Johannes Ferber, the managing director who’s spearheading Ikea’s expansion in Germany.
“It’s a very expensive experiment for us, but we want to know if the city-store concept works out,” he said. “Altona could serve as a model for other big cities such as Berlin.”
The venture is part of a wider trend by retailers to populate urban centers as companies from Tesco Plc to Carrefour SA open smaller downtown shops. Carmakers are also discovering city centers. Daimler AG this month opened its first ever Mercedes Me store, also in Hamburg, with a bistro, gallery area and a single car on show.
Ikea, which operates 356 stores worldwide, has 49 centers in Germany. The Altona outlet is its third in the port town, Germany’s second-largest and most affluent city in terms of gross domestic product per capita, according to statistics compiled by the local business development authority.
The decision to situate the store in Altona came as the retailer sought an additional location in Hamburg, said Ferber. It was approached by the local municipality, which offered the site that had been abandoned for more than six years, he said.
The retailer expects an average 4,000 customers per working day and about twice as many on Saturdays and other peak days, compared with as many as 12,000 at sites in Munich and Berlin, he said.
“There are many city-dwellers who don’t have a car or aren’t willing to drive outside the city to do their shopping,” said Ferber, adding that he expects more than half of Altona clients to travel to the store by public transport or by bike.
Ikea will lend out cargo bikes and clients may borrow bike trailers for free to transport their purchases home if they return them within three hours. Alternatively, customers can order bike couriers at a starting price of 9.90 euros to do the physical work and let them carry their goods home, larger furniture boxes included, according to the company.
“It’s a big challenge for us as we needed a good traffic and service concept to get products to clients’ homes within a short period of time,” Ferber said.
Ikea also tailored its product selection in Altona to the 150,000 potential customers that live within a 3-kilometer (1.9- mile) radius of the store, including shelves, boxes and baskets. Local staff visited about 200 apartments in the area to assess the challenges clients face, said Ferber.
“There are many people in Hamburg who take their expensive bicycles into their apartments as they don’t have a basement, and we have found solutions for that” by offering a special clamp to hang a bicycle on the wall, he said.
Unlike Ikea’s typical hyper-markets with few windows, the Altona store’s ground floor has a large glass front displaying products such as Skruvsta swivel chairs for 99 euros and Maskros lamps for 39 euros.
Inside, Ikea combines its furniture display areas with the market halls, where shoppers can load products onto their trolleys or stuff them into carrier bags. In conventional stores, the two areas are on different floors.
“It’s a new way of presenting goods as the kitchen section is followed by the cookery shop where you can buy glasses, porcelain, pots and pans before you get to the section with dining tables and chairs,” Ferber said.
The store opening sparked opposition from some locals, who voiced their criticism by attaching “Kill Billy” stickers to lamp posts and trash cans in a reference to Ikea’s hallmark Billy shelves, fearing the store opening will inflate rents and property prices.
Proponents organized a referendum in Altona in January 2010, with 77 percent of voters in favor of the store. “If the approval rating had only been at 51 percent we may have withdrawn, but as we got that comfortable majority we decided to get on with it,” Ferber said.
“For Ikea, it must be a very different experience from setting up a store on a green field on the outskirts, as they need to come to terms with their neighbors here,” said Florian Kroeger, who runs a deli on the other side of the pedestrian zone.
Kroeger’s family has owned the little Claus Kroeger store for 90 years, selling a selection of teas, coffee and wine. Kroeger, 41, said he’s in favor because the store will bring a long-needed boost to the traditional working class area.