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CHAPTER 8 Efficient Retail Stores > The Challenges of Growth

The Challenges of Growth

Over the years, Ikea stores have increased substantially in size. Let’s look at some of the numbers. Sales of $140 million (€100 million) per year are not unusual. Stores are open 60 to 70 hours a week. Most of them have 500 plus employees, and staff fluctuation can be between 4 percent and 80 percent a year. More than 50 percent of these store employees have less than two years of experience. More than 50 percent work part-time. More than 2 million visitors per year pass through an average store. Customer service expectations have increased over the years, and the pressure to reduce costs is higher than ever before.

Meanwhile, staff costs have grown to 40 percent of the total cost base of an Ikea store. Increasing store productivity is essential to improve the overall cost level and to continue delivering low prices. The challenge during the 10 years 1999 to 2009 was the imbalance between reduced sales prices and increased salary costs. Sales prices were reduced on average 2 percent per year while at the same time salaries increased by some 3 percent on average per year. This required around a 5 percent productivity increase every year just to stay at the same cost level. The company achieved this level of productivity, but an 8 to 10 percent productivity increase was needed to improve the cost base. This has proven very hard to achieve so far given the challenges of improving store standards, longer opening hours, and higher service requirements.


  

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