Ikea may be closing one of its UK stores but it can face up to the threat of Amazon

The Swedish flat-pack furniture pioneer is belatedly reinventing itself to adapt to the online world, says Ben Chapman

Ikea is not going to become the next Debenhams or House of Fraser (Michel Porro/Getty Images)

Ikea is closing down one of its large UK stores for the first time since crossing the North Sea to spread the flat-pack revolution in this country more than three decades ago.

But while the news is of course unwelcome for staff at the Coventry branch who will lose their jobs, it is unlikely to herald deeper problems for Ikea.

The Swedish retailer’s executives blamed the familiar cocktail of woes that has done for a number of household-name brands, including high costs and shifting habits as consumers shop online more and more.

But Ikea is not going to become the next Debenhams, or House of Fraser, or Mothercare, or Comet. True, Ikea has had to shed thousands of staff worldwide in the last few years, but it's in a much stronger position than most to take on the challenge of Amazon et al.

Unlike many of the growing list of high street casualties, Ikea isn’t weighed down by a portfolio of hundreds of stores and the huge rent and business rates bills that come with it. Ikea has just 22 UK outlets, mostly vast warehouses based on the outskirts of big cities that are home to lots of potential customers.

Since it was founded in 1943, Ikea has perfected a winning formula of low-cost furniture sold in big, utilitarian, stores.

As retail expert Jonathan De Mello points out, while Coventry is a medium-sized British city, it just didn’t generate enough sales to sustain a big store.

The Coventry store itself was a bit of a punt for the typically conservative Swedish firm. Opened in 2007, it was an early attempt to deal with the looming threat posed by shifting consumer habits.

Appreciating shoppers’ increasing desire for convenience, Ikea went for a location store closer to a city centre than it would normally go for.

That meant a smaller and more expensive site. But instead of adapting its tried-and-tested model, Ikea basically tried to squeeze the huge format into a smaller site - over seven floors.

That resulted in higher operating costs and meant that Ikea’s trademark maze-style layout, which cajoles people into walking through almost every section - and making a few impulse purchases along the way - didn’t necessarily work.

“Footfall drops off dramatically with each floor you go up,” says De Millo.

Or as Ikea's bosses put it, they couldn’t “resolve the fundamental challenges connected to the location and the format of the store”.

So Ikea’s first foray into British city centres may not have been a success but its new offering is likely to do better.

Its opened up much smaller, more modern, high street shops in locations around the world including London, with many more planned. As others retailers bust, Ikea should be able to grab some bargains as rent comes down and the new branches will act like mini showrooms to entice people to either buy online or take a trip to the big superstores.

Shoppers can buy smaller items or design the layout of their ideal bedroom on tablet screens.

Ikea was slow to move into the online world but has now invested heavily in its website. And, in contrast to struggling rivals, it still offers an experience, a day out that remains, to a certain extent, unique.