Ikea, the Swedish home furnishings company, is exploring a new way to reach more shoppers in the United States. The retailer will set up kitchen planning studios inside 10 Best Buy (BBY) locations in Florida and Texas later this year. Each studio will help customers design kitchens without carrying the full range of Ikea products.
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The move is intended to speed up Ikea’s presence in mature markets. It takes years to build large stores, while space inside Best Buy stores is ready right away. Ikea says these sites are in “white spots” where it does not currently operate, including Daytona Beach and Lakeland in Florida, and Humble and Mesquite in Texas. At the same time, Best Buy gains a new reason for shoppers to walk into its stores. That may be useful as consumer electronics chains face slowing demand after a surge in the pandemic years.
Meanwhile, BBY shares have climbed a modest 1.86% yesterday, closing at $77.59.
New Formats and Global Push
Over the past few years, Ikea has changed its business model. The retailer used to rely on big warehouses outside cities. Now it offers city center shops, online ordering, click and collect services, and home delivery with assembly. Customers like the convenience, though some complain about product availability in the smaller spaces.
Globally, Ikea holds a 5.7% share of the furniture market. It aims to increase this figure and is testing new formats in both stores and online. In China, the company sells on Alibaba’s (BABA) Tmall and, since last month, on JD.com (HK:9618). About one-fifth of new customers in the country now come from Tmall. Sales on JD.com in the first week were better than expected.
Executives say there are no plans to use third-party on-line sites in the United States or Europe. Instead, the Best Buy partnership may serve as a model in those regions. Ikea can use large stores as fulfillment centers for online orders, while new partnerships allow it to move faster.
Is Best Buy a Good Stock to Buy Now?
On the Street, Best Buy scores a Moderate Buy consensus rating. Out of 20 analysts’ ratings, eight rate it a Buy, with one analyst seeing it as a Sell. The average BBY stock price target is $79.67, implying a 2.68% upside from the current price.
