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Will IKEA find success in standalone restaurants?
IKEA is considering opening standalone cafes and restaurants in urban centers, according to Fast Company.
The move would come as managing director Michael La Cour has a made number of investments in the chain’s food department, including streamlining its food supply chain, reducing waste, investing in local sourcing, and adding healthier options like chicken and vegan Swedish meatballs to menu offerings. Food sales grew at eight percent on an annual basis over the last three years and reached $1.8 billion in 2016, or approximately 5 percent of its overall sales.
The popular $2 breakfasts and $5 meatball meals are also a huge traffic driver. About 30 percent of IKEA food customers head to the store just to eat, according to IKEA. About half of the menu items are Scandinavian with the rest adapted to local fare.
“The mere fact that we don’t need so many square feet to do a café or a restaurant makes it interesting by itself,” Mr. La Cour told Fast Company. “I firmly believe there is potential. I hope in a few years our customers will be saying, ‘IKEA is a great place to eat — and, by the way, they also sell some furniture.’”
IKEA has earned wide attention over the last two years from the opening of a number of innovative food pop-ups in London, Paris, Oslo and Toronto. In a pop-up last September in London, diners built their own meals alongside trained head chefs for up to 20 of their friends.
The Toronto pop-up opened last May featured a gigantic interactive recipe book, green displays to inspire people to grow food at home, a virtual-reality tour of four different IKEA kitchens, and meatball carts. Said Lauren MacDonald, country deputy marketing manager, IKEA Canada, at the time, “The IKEA Pop-up Experience is part of a 360⁰ campaign which supports the IKEA global theme of ‘It Starts With The Food’, which is built off the insight that food unites us.”
Discussion Questions
DISCUSSION QUESTIONS: What are the pros and cons of IKEA opening standalone cafes or restaurants? How important are its in-store restaurants and food to the overall IKEA shopping experience?
Poll
BrainTrust
Kim Garretson
Advisor, MyAlerts
Adrian Weidmann
Managing Director, StoreStream Metrics, LLC
The restaurant business is cutthroat and demands a lot of its people. A standalone restaurant is nothing like a convenience cafe within a store … I hope the folks at IKEA have done their homework.
IKEA is a destination and the small cafe concept has served them well as they offer a shopping break and promote food items. Expanding this makes good business sense. When it is about traffic and conversion, both are well served by this on-site amenity. Expanding to off-site locations can drive brand awareness to homeware and furniture locations.
The pop-up concept plays perfectly into IKEA’s growth strategy. Instead of just focusing on what you can buy at their giant stores, or online (without free shipping of course), having food there is brilliant. Who wouldn’t want to consider an IKEA kitchen once a meatball cart came around? It’s very much in line with the food truck phenomenon, but with this one also giving you idea-starters for your home.
Given the competitive landscape and somewhat stagnant nature of restaurant revenue and the rise of click-and-collect dining, I hope IKEA takes a long deep breath before going down this road. It seems they could combine their foodservice with online shopping within a shop-within-a-shop environment. What about an IKEA in a food court? Enjoy a Swedish meal while shopping for some furniture. It could be interesting.
IKEA cannot discard the fact that their destination store is a huge factor behind people buying food in their stores. Perhaps a better question might be, how well would $5 meatballs sell in 7-11? It is not just the initial flurry of growth that a standalone cafe might bring — the real question, is for how long would this concept be able to survive on repeated sales?
My first reaction was to shake my head in disbelief … at least on the standalone restaurant model. But then I started thinking.
“Breaking bread” together is the ultimate driver of community and loyalty. It does unite us. And if they are successful in making food even more of an IKEA experience they can’t help but win all around. As I understand it, patrons are engaged in food selection and preparation. All done with stuff you can buy at IKEA. They explore VR kitchens that can be made real in the store. And best of all, patrons are encouraged to grow their own food — and once more I assume you can buy home garden apparatus at IKEA. 42 million households in the U.S. grow at least a portion of their own food and this is growing exponentially — especially among Millennials who, for some strange reason, are tiring of ingesting chemicals. It’s a 45 minute drive to my closest IKEA, but I’ve got to do that more often.
IKEA is a proven brand, which makes the fast-die potential of the restaurant business fade. They can also use new furniture products in the store and videos and catalogs to keep the IKEA air about the place. IKEA can make this fly — as easily as La-Z-Boy could open movie theaters with all La-Z-Boy furniture. A strong brand can be extended a long way.
I can see them doing pop ups or trucks to help promote the IKEA brand. The cafe food at IKEA for me is a convenience food for family shoppers and novelty food (I get their soft serve every trip) for some. A standalone restaurant with all the fixed cost with none of the traffic from shoppers to lean on doesn’t seem to make sense.
As much as I enjoy living near an IKEA and occasionally going there just for their food, I don’t see too much success in opening a full blown restaurant. The current pop-up strategy works because of their limited availability. Moving past that would require a significant commitment from IKEA. Starting slow and testing this idea one location at a time would be the most prudent course of action.
Done well, with the right format, menu and location, I think it can work!
The “cons” are fairly obvious: it’s by no means obvious there is an untapped demand for Swedish — or more generally “Scandinavian” — cuisine, and what might well be a viable operation as an addendum to the main store may not be viable as a stand alone operation. Also, I’m not sure how much brand equity people will transfer, not to mention having to appeal to the many people who have no experience with IKEA (hard to believe, maybe, but I’m sure they’re out there).
The “pro” is equally obvious: IKEA usually does things well, and it has plenty of resources to make it work … or at least to give the idea it’s best chances.
Forget the food. This is an internet play; reinforcing a brand’s DNA by digesting it. Will meatballs sell more furniture online by making the brand more top of mind? Big task to create an environment that crosses the mind’s abyss.
Big risk too. There are few companies with the brand elasticity to move from furniture to food. It sounds like a great idea until customers starts wondering who/what is IKEA.
Swedish food isn’t Italian food. That may be an opportunity if the real goal isn’t to sell more meatballs; but to create a community that buys more furniture more often.
Done properly, this could be the most brilliant idea yet to leverage and combat the internet. But I doubt it.