Can IKEA's business model save the malls?

For years now, malls have faced challenges related to changing consumer behavior. Yet, IKEA's holding, Ingka Group, has managed to build its own mall empire in recent years. These centres stretch from China to Europe and the U.S., and the company says it wants to buy more locations as it seeks to diversify beyond retail, as The Wall Street Journal recently reported.

What is the essence of the business model?

The company's idea is to connect its malls to an IKEA store and attract more potential customers with additions such as WeWork-style co-working spaces, Scandinavian-style dining halls and children's play areas.

Ingka opened its first mall – or ‘meeting place’, as it calls them – in 1973 in Sundsvall, Sweden, in combination with an IKEA store. The company has been expanding its property business in recent years, opening a series of new malls, and says it is actively looking to buy and develop more locations, including the USA.

People are looking for places that offer much more than just shopping,” says Cindy Andersen, managing director of Ingka Centers, the company's property division. "If you give more reasons to visit, then people will keep coming."

Development in Bulgaria

This model (buying multiple retail spaces in which, in addition to shops, there are also shared workspaces) is actively developing on the European market as well. The last such development was in London in 2020.

In Bulgaria, the company decided to launch another pilot project – mobile hubs. It kicked off in the summer of 2023, and so far, the company says, it's been extremely successful and well-received by customers.

The idea is that in populated areas where IKEA does not have a physical store, people can order online and receive their shipments from these mobile hubs.

Currently, there are such mobile hubs in Pleven, Blagoevgrad, Haskovo and Stara Zagora," the company reps told Economic.bg.

IKEA says that for the first 6 months since the launch, the results have been very positive, and the total number of online orders has almost doubled.

Customers are giving excellent feedback about this additional option to receive their orders, and the company is looking at other cities to expand the service," said the representatives.

IKEA is currently the only one offering such a service in Bulgaria. The retail industry says that the concept could prove extremely interesting for the country and the development of this national sector.

Ivan Gramatikov, Asset Manager of Videolux Holding, the company owner of Praktiker and Technopolis stores and one of the largest investors in retail parks in Bulgaria, expressed his opinion to Economic.bg and also confirmed that this business model is really interesting and innovative for the Bulgarian market.

Translated by Tzvetozar Vincent Iolov