Business

Ikea is closing a UK store but it hasn't given up on city centers

Posted February 4, 2020 12:34 p.m. EST

— Ikea is closing its only major downtown store in the United Kingdom after years of losses. But it's not abandoning city centers yet.

The Swedish furniture maker said in a statement Tuesday that it plans to close its store in Coventry, which was built in 2007 in the most dense part of the city.

The store was built over seven levels because space was tight. But the unusual design pushed up operating costs and compromised the shopping experience, Ikea said in a statement.

Ikea said that local shoppers increasingly moved to retail parks and online, contributing to "visitor numbers being substantially lower than expected and continuing to decrease over time."

The store, which is one of Ikea's 22 locations in the United Kingdom, will be the chain's first standard-size store to close in the country, according to a spokesperson.

"We now know that this was the wrong type of unit for the location as it is neither a high street store nor a more traditional Ikea store," the spokesperson told CNN Business.

The company said it is considering introducing collection points in Coventry for online orders and will try to retain as many of the 352 employees affected by the closure as possible.

City stores

The news comes as Ikea continues to experiment with smaller showrooms in the heart of cities over its giant blue and yellow warehouses.

Its city center locations aim to reach younger shoppers who may want to visit a store but don't have cars to easily transport them to the outskirts of cities.

Ikea has launched what a spokesperson says is its "first small format city store" in London, a project made possible by the purchase of a shopping mall by a subsidiary of Ikea's parent.

Last year, Ikea opened two "planning studios" in London, including one in upmarket Fitzrovia. It has designed something similar on Manhattan's Upper East Side, as part of plans to roll out 30 smaller stores in major cities around the world in the next few years.

Ikea has entered a more "experimental phase" in recent years, said Patrick O'Brien, UK retail research director at GlobalData.

"They're taking a few more risks with formats, in the expectation that where it doesn't work they'll pull out," O'Brien said.

It has been growing its leading market share in the United Kingdom the past five years, he added. The Coventry closure "shouldn't be seen as there being some let up in demand for IKEA goods in the UK."

-- CNN Business' Nathaniel Meyersohn contributed reporting.

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