Report: This is how retailers and city centers are affected by an Ikea-establishment

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Several Swedish city centers are experiencing decreasing retail sales when external shopping centers grow. But a licentiate thesis made by a HUI Research PhD points out a positive effect on the trade turnover when Ikea is one of the players on studies made from 2000-2011.

“The rumor that Ikea would have a bad impact on town centers seem excessive. On the contrary, our results show that an Ikea establishment is a winning ticket for trade development in the municipality, “says Helena Nilsson, PhD student at the HUI Research and Dalarna University.

The establishment of an Ikea store is important for a municipality’s development. Both trade turnover and employment in the municipality affected positively. Sales of durable goods increased by 20 percent and employment by 17 percent. It shows the Licentiate today defended by Helena Nilsson at Dalarna University.

The licentiate thesis “The impact of big-boxes on local retail: What Happens When IKEA Comes To Town?” At Dalarna University consists of two sub-studies that examine how an Ikea establishment affect regional trade developments. The dissertation shows that Ikea is important for a municipality’s development.

The first paper examines the effects of Ikea on retail revenues and employment in the municipalities that Ikea chose to enter between 2000 and 2011; Gothenburg, Haparanda, Kalmar and Karlstad

It shows that a new Ikea store will lead to increasing sales of durable goods in the municipality by about 20 percent – and the number of employees increased by 17 percent. The effects of the Ikea establishment in turnover and number of employees of durable goods in the neighboring municipalities are small.

To examine effects of Ikea entry on incumbent retail firms, the second paper in the thesis analyses how an Ikea entry affects the revenues and employment of local retail firms in three municipalities; Haparanda, Kalmar and Karlstad, which experienced entry by Ikea between 2000 and in 2010.

The results show that turnover will increase by an average of 11 percent, but that the effect varies with the distance to Ikea.

The effect is strongest for those businesses located within 1 km of the Ikea store, with sales rising by 26 per cent due to the Ikea establishment. No statistically significant effects can however be observed for businesses located in the city center, or located more than 5 km from the new Ikea store.
This suggests that Ikea is favorable for other retailers in the community and gives rise to significant spillover effects on existing trading in the vicinity of the establishment.

Sales of durable goods decreases on average by 2 percent in the neighboring municipalities, whereas the number of durable goods in the neighboring municipalities not affected by an Ikea establishment. Furthermore measured no effects on retail in city centers.

After 2010, Ikea has started to build external malls next to their stores in Sweden.