establishing ikea - european commission |...

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Establishing IKEAIKEAs experiences with commercial establishment rules in EuropeBest practices in balancing spatial planning objectives and retail

establishment.

Martin WeiderstrandSimone ManciniIKEA EU Affairs

IKEA Group at a glance

€1.4 billionIKEA Food turnover

IKEA Food is comprised of the IKEA Restaurant, IKEA Bistro, IKEA Swedish Food Market and the IKEA co-worker restaurant

9,500ProductsEvery year we launch about 2,000 new products.

212 millionPrinted cataloguesThe IKEA catalogue app was downloaded 9.7 million times.135,000

Total co-workers

worker restaurant.

303IKEA Group stores

Total IKEA Group co-workers*

* New way of calculating co-workersThe IKEA Group has adopted a new way of calculating the number of co-workers. Previously published numbers for FY12 and FY13 contained temporary andseasonal positions.

Number of IKEA Group stores

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IKEA Group at a glance

TOP 5 SELLINGCOUNTRIES

TOP 5 PURCHASINGCOUNTRIES

SALES PERREGION

PURCHASING PERREGION

EUROPE215 Stores

60% Purchasing value19 Distribution centres

RUSSIA14 Stores

3% Purchasing value1 Distribution centre

3 Trading service offices5 IKEA IndustryProduction units

ASIA19 Stores

Retail, distribution, production:operations in 43 countries

NORTH AMERICA50 Stores


1 Trading serviceoffice

1 IKEA Industryproduction

unit




SOUTHAMERICA

1% Purchasingvalue

1 Trading serviceoffices

AUSTRALIA5 Stores

1 Distributioncentre

303IKEA Group stores

Located in 26countries

684Million visitors

to the IKEA Group stores

60%of production takes place in

Europe

1,046home furnishing

SuppliersIn 52 countries

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Agenda

-What is a good balance?-What works and what doesn't-How to bring the best of the Centerand Periphery

What is a good balance?What is the right tool?

Spatial planning-Land use

Service Activity-Commercial establishment

EmploymentSocially good build environment EmploymentCompetitionPrice level/costAttractiveness of locationRange / accessibilitySustainable development-consumer access

Socially good build environmentTraffic environmentAccessibility to goods & servicesAttractiveness of communitySustainable development

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95. To take account of existing retail facilities and impact on existing

67. Restricts localities available for new establishments.

What is a good balance?Restrictions upheld by ECJ as not justified C400/08

-Regulate land use- not traders and the market structure‐not consumer protection

96. Market share report that is unfavorable seen if the market share exceeds a certain value

97. Require applicant of ceilings as regards to market share and the impact on existing retail trade above which is it impossible to

67. Limit sales areas for which such licenses can be obtained

68. Licensing establishments insofar as there will be no effect on existing small traders

69. Procedural routines that have a appreciatable negative effect on the number of applications made or / granted

Regulate land use not retail activity

-Protect the consumer not the economic operators

pestablish large retail establishments

81. Limits max 9% of estimated staple supply or 7% for non staple supply, Maximum area available for Hypermarket is 23600 m2

or / granted

-Don't close the market by rules or procedures

GR 12,3 %ST 45% (9)PP 503.842

GR 28,3 %ST 33% (2)

GR 124,2 %ST 60% (3)PP 1.085.800

GR 73 %ST 40% (2)PP 1.120.400

IKEA market share growth in Europe 07-13

GR 14,8 %ST 13% (6)PP 1.751.043

GR 30,8 %ST 17% (3)PP 3.539.167

GR 38,2 %ST 8% (1)PP 1.520.909

GR 23,5 %ST 33% (2)PP 1.839.167

GR 33,3 %ST 25% (2)PP 4.812.625

GR :Growth 07-13 %ST :Store growth (Actual)PP: Proportion Stores/Population

GR 62,9 %ST 34% (11)PP 2.229.897

GR 28,3 %ST 48% (10)PP 2.993.000

GR 85 %ST 47% (7)PP 3.113.600

GR 84,6 %ST 33% (1)PP 3.534.000

GR 20,8 %ST 0% (0)PP 1.212.571

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Good example – Sweden

GENERAL RULES AND RETAIL GROWTH

Key points- Controls land use (not retail

turnover or range)

What is a good balance?Commercial Establishment regulations

turnover or range)- Assesses key goals for a “good

build environment” such as Traffic, accessibility, competition, environment, esthetics...

- Allows for competition – No absolute caps

- Case by case decisions taking into account local specificitiesF i l di bl li i

Sustainable Growth

- Fairly predictable application routines

- No ENT or measures with equivalent effect

- Municipal retail strategy is key for positive outcomes

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What do studies show?IKEA’s impact on a municipality

+ 20%TO change for seldom purchase goods

+ 17%Job change in the muncipalities seldom purchase goods

+ 10%TO change for retail in the municipality

-2%

What do studies show?IKEA’s impact on neighbouring municipality

TO change for seldom purchase goods

+/- 0%Job change in neighbouring municipalities seldom purchase

IKEA et 2006

municipalities seldom purchase sector

+/- 0%Job change in neighbouring municipalities retail sector

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SE DE EU 28 Linear (SE) Linear (DE) Linear (EU 28)

Retail Sales DevelopmentSE-DE-EU

7

85.

91.2

94.3

96.4

100

100.8

102.8

104.897.9

99.6

100.6

99

101.3

97.6

100

102.7

104.8

106.295.43

97.59

100.35

102.50

102.09

99.81

100.11

99.37

98.26

98.12

76.1

79.7

6

2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: Eurostat, SCB, Destasis. Index base period 2010

Retail stagnation

RULES READY FOR E‐COMMERCE?TOWN PLANNING AND MODERN RETAIL

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Ready for omnichannel?E-Commerce and restrictive regulation20.0

5.0

10.0

15.0

Sweden

United Kingdom

Germany

Italy

Source: Eurostat, Retail sale via mail order houses or via Internet

‐5.0

0.0

2010 2011 2012 2013

• Use service activity as a tool to control competition

Protect or develop?Commercial Establishment regulations

tool to control competition ( to limit purchase power outflow)

• Controls retail range, size etc – what products that can compete (hinterland monopoly)

• Controls where customers should come from

Stagnationshould come from (congruency principle)

• Closed market after economic thresholds are met

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What do studies show?Effects in Germany – City & Periphery

51%Freiburg

Yes, always18

Ulm

51%Of IKEA customers in Freiburg & Ulm that always or sometimes visits the City center stores

+76%

17%

42%

41%Sometimes

No

No answer

18%

26%

56%

180200

Change for fringe assortment in city centerafter IKEA established

+76%Change for fringe assortment in city center Freiburg in 2010

Source: GMA study 2010

100

185 176

020406080

100120140160

1998

2006

2010

Best practice ‐ willingness and efficiency ‐ Italy

ADMINISTRATIVE ROUTINES, TRANSPARENCY AND PREDICTABILITY

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Retail Sales DevelopmentIT

104.00

106.00

94.00

96.00

98.00

100.00

102.00

Italy

Source: Eurostat, Index base period 2010

86.00

88.00

90.00

92.00

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Case study: Pisa Administration: From slow to fast

In the beginning- Eight years process

What made the difference?- Clear rules of Eight years process

Six years of uncertainty Two years of efficient work

- Change of administrative pace and interest

- Starting to see retail as a tool for regional growth

Clear rules of engagement

- Transparent & Cooperative handling of the issue (local–regional)

- Clear decisions and explanation why there are issues or hindrance –issues or hindrance

- Engagement to find solutions

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Direct Impact

Employment

IKEA in SocietyDIRECT AND INDIRECT IMPACT OF IKEA IN ITALY FY13

Tax contributionValue added

6.431 jobs

424 million € 119 million €

Indirect Impact

Total Impact

1. Employment Indirect Impact

Employment

Tax contributionValue added

14.575 Jobs

580 million € 167 million €

p y

3. Tax contribution2. Value added

21.006 Jobs

1 billion Euro

286 million di Euro

Source Ernst & Young study

SUMMARY

GROWTH IN BOTH CENTER AND PERIPHERY

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Key Drivers- Controls land use, (not retail

What is a good balance?Way forward

Barriers- Use service activity as a tool

-Regulate land use- not retail activity, (turnover)

- Assesses key goals for a “good build environment” such as Traffic, accessibility, competition, environment, esthetics...

- Does not close the market for competition

- Predictable application routines- Develop both center and

periphery in cooperationCompetitive cooperation to

Use service activity as a tool to control competition (to limit purchase power outflow)

- Controls retail range, size etc – what products that can compete (hinterland monopoly)

- Controls where customers should come from

activity-Protect the Consumer & Environment, not the economic operators

-Don't close the market by rules - Competitive cooperation to deliver better services to the consumer

- Municipal retail strategy is key for positive outcomes

should come from (congruency principle)

- Closed market after economic thresholds are met

Don t close the market by rules or procedures

-Municipal retail strategy is key for positive outcomes

Demand, Jobs & growth in EU

INTERCONNECTED EUROPE

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