Dubai: Big-box home furnishings retailer Ikea will make life more interesting for families with children as it prepares to open another big box on Yas Island in Abu Dhabi this quarter.
The 33,000-square metre store will offer "the Ikea experience in its totality", including a 180-square-metre forest from the south of Sweden where up to 60 children can play.
"We will launch our Småland concept, an artificial forest, which is probably the first in the UAE," said Siddarth Y. Bhide, country operations and project manager for Ikea at Al Futtaim Trading Company, which operates the Swedish brand in the Middle East. "It's an interactive experience for the children, without gizmos. It's about running around and playing, not video games and the like."
Kids are important to Ikea Middle East. The company announced earlier that it will donate one euro for every soft toy sold between November 1 and December 31, 2010, in support of UNICEF's education programme.
"What we are offering in Yas is what the Ikea brand offers globally," he said. "In February we will also bring the Småland concept to the Dubai store."
Ikea will close its 9,300-square-metre store in Abu Dhabi's Marina Mall after the store on Yas opens, Bhide said. "Abu Dhabi is growing towards the mainland as Abu Dhabi island becomes saturated," he added. "So, in terms of investment for the future Yas is the correct location for us.
"Also, with the expressway and the other infrastructure becoming available on Yas and Abu Dhabi overall, getting to and from Yas is going to be very easy. Besides, Khalifa A, Khalifa B and Shahama will also become part of our customer catchment area. Plus, Al Ain is only 45 minutes away."
Expansion
Retailers already well established in Dubai are looking to expand into a wider area as the emirate becomes saturated in terms of malls, according to recent research. "These retailers have used Dubai as a base to open up their flagship property and will now be looking to other markets in the region," said Matthew Jay, senior retail analyst at CB Richard Ellis Middle East, the real estate consultancy.
Average household spending power in the UAE stands at $14,400 per annum, according to property consultants Colliers International. Emirati households account for the lion's share of this, with an average of $23,000, while Western, other Arab and Asian households have annual spending power of $19,500, $13,500 and $10,000, respectively.
Tourism is also a factor in stimulating retail growth, according to a study by Indian research firm RNCOS, while increasing urbanisation is also making the UAE retail sector buoyant. The Urban Planning Council (UPC) has projected that Abu Dhabi City's population will rise to 1.3 million by 2013.
"There is huge potential in this region in the long term," Bhide said. "Populations are growing at a fairly high rate — higher than most European or North American countries. It's also one of the youngest populations in the world, with about 36 per cent being below the age of 26.
"Our UAE target demographic is the 25- to 39-year-olds. A bulk of the population is in this group.
"We categorise the population groups into families with young children, families with older children, and families who have older children who've moved out. Then you have the ‘single and sharing'.
"The biggest category for us is the first one, and that is why children are so important to us," he said.
Ikea sales in the UAE logged "single-digit growth" in 2010 compared to 2009, Bhide said without disclosing actual numbers.
"Dubai has stabilised and is growing. It will continue growing," he said. "Abu Dhabi has the biggest potential for us because it's a new store. "The Dubai store has a range of 7,500 articles. This will increase to 8,500 at Yas."
Ikea has had to adapt its range to suit the new economic circumstances. "We constantly ask ourselves: What do people want to buy now? For example, the shift has been towards buying more accessories and putting off larger investments.
"You are not going to redo your whole home; you will probably buy accessories to change the look and feel. And Ikea is unique in the sense that it allows you to refurnish your home at a very low cost," Bhide said.
Low cost
"You could just change the covers on your sofa, not the sofa itself. You could change your curtains, or add cushions. You can refresh your home at a low cost."
In contrast to most global businesses, Ikea UAE has been adding staff to support its expansion. "We've gone from 400 to about 600 people in our stores. With Qatar and Egypt [see sidebar] coming on board, we will add even more," he said.
Globally, Ikea has forecast sales of €23.8 billion in 2010, compared to €22.7 billion in 2009. It has a range of almost 10,000 products sold through 300 stores in 35 countries. Asked about Ikea's store philosophy, Bhide said: "We offer the complete shopping experience; but we also want to offer a day out for the family.
"Like an Ikea picnic. The most important component is the kids."
The larger floor space of the Yas store will allow Ikea to fulfil this target. Apart from Småland, Ikea on Yas Island will have a 550-seat restaurant and 1,450 dedicated car parking spaces.
It will have 55 room sets as opposed to 33 in the Marina Mall store. The showroom and Market Hall are 6,000 square metres each, the self-serve warehouse is 6,300 square metres and 22 checkout counters will ensure there is "virtually no queuing time".
"We want the families to come to Ikea together. The restaurant also caters to children — with plastic bowls and cups, baby cups, food warmers and bibs being available," Bhide said. "Kids are important."
Positive outlook
- €23.8b: is the company's sales forecast for 2010
- 35: number of countries company operates in
Ikea's new store on Yas Island is an Al Futtaim tour de force.
"It's uniqueness lies in the fact that it is virtually a 100 per cent Al Futtaim project," said Siddarth Y. Bhide of Al Futtaim Trading Company.
Al Futtaim Carillion is the main contractor. Al Futtaim Engineering is providing the mechanical, electrical and plumbing as well as the construction staff transportation services. The engineering arm is also providing the fitout accessories like Toto products in the washrooms.
Al Futtaim Auto and Machinery Company is the sub-contractor for goods transport and warehouse equipment, including the handling and racking in the store.
"The whole box is an Al Futtaim project," Bhide said. "Aldar Properties is the landlord. Aldar tendered the construction and Al Futtaim Carillion won it. The rest of the contracts were also won through tendering by the main contractor."
New stores to open in Qatar and Egypt
Al Futtaim Trading Company will increase the number of square metres operated under the Ikea branding in the region to about 120,000 when it opens stores in Qatar and Egypt in 2011.
Its Dubai store spans 25,000 square metres; the new Abu Dhabi store will be 33,000; and the ones in Doha and Cairo will be about 30,000 square metres each.
"We are on a path of expansion in the Middle East — we have started projects in the North Gate area of Doha and the Cairo Festival City development in New Cairo," said Siddarth Y. Bhide of Al Futtaim Trading Company. "Both projects are at the design stage."
Typical initial investment in a 28,000- to 30,000-square metre Ikea store, he said, is about €50 million (Dh245 million), with breakeven in about five years.
"The investment could vary from country to country and this figure is the construction and fitout cost," Bhide said. "It does not include inventory."
