Ikea's New Zealand expansion might not be everything we hope for

Ikea has announced its intention to open in New Zealand, but a business expert says it may not be everything franchise-lovers hope for.  

The Swedish homeware giant confirmed on Thursday its intention to make Ikea a "loved and meaningful brand for the people of New Zealand" and that it's exploring expansion opportunities in the country. 

The announcement sent New Zealand into a frenzy of excitement, with one Twitter user hailing it an "early Christmas present" while others said the move will be "brilliant" for New Zealand and that it's the "best retail news in ages". 

But the furniture giant's expansion into New Zealand might not bring the mega stores that we expect, says Dr Bodo Lang, head of the University of Auckland's Business School and Marketing Department. 

"If they open with the traditional mega stores we're used to from overseas, I think that's what people are expecting, and if that happens I think there will be a lot of excitement in the market," he said on Friday. 

"But to be perfectly honest with you, I'm a little bit doubtful whether they will really open the way that we think."

Dr Lang expects Ikea will be careful about how it sets up. It could simply offers its products online from a warehouse based in New Zealand - but Dr Wang expects that would disappoint Kiwis. 

The retailer looks for areas with more than 1.5 million people within a 48km radius to establish a mega store. That leaves Auckland as the only viable option for a mega store to be opened.  

"Some of us expect there to be mega stores everywhere, but based on my knowledge, I think the only viable place for a mega store in New Zealand is Auckland," said Dr Lang. 

"We could have two of them here but there's no other region in New Zealand that comes close to having a million people within one hours' car ride.

"I don't know if we'll get three mega stores in Auckland, Wellington and Christchurch - I'm just not sure about that."

However, if a market is not attractive, there's no reason why Ikea would look to open there. So New Zealand clearly has something to offer, says Dr Lang. 

"There's a signal that comes when Ikea opens in a country like New Zealand. It's that we've finally made it onto the world stage and our retail landscape is like that of other countries."

The move will not be welcomed by furniture stores in New Zealand like Freedom Furniture and Harvey Norman, he said.  

"All the other bigger chains, Harvey Norman, Freedom Furniture, and the others, will all be worried about it, particularly the ones that are really focused on furniture."

But The Warehouse has signalled that it's ready to take the furniture giant head-on.

In reference to Ikea's famous Swedish meatballs, The Warehouse tweeted a picture of its dining products with meatballs photo-shopped in. 

"The Warehouse is pretty well-positioned because they sell very little into the furniture market and have a really diverse portfolio," said Dr Lang.