When the Swedish giant comes to town

Share

For some strange reason Debra Jonasson-Young doesn't fear the looming Swedish giant.

Instead, the vice-president of Winnipeg-based Dufresne Furniture and Appliances is almost giddy that Swedish home-furnishings mammoth Ikea AB will soon open up in her city.

"Ikea is probably the one retailer in the world that actually expands the existing market," Ms. Jonasson-Young says. "When you consider the draw into the marketplace of a store like Ikea from places like Saskatchewan, North Dakota, rural Manitoba and northwestern Ontario — that's what we get excited about."

While it's great to focus on the positives, experts say that such an outlook likely won't help this Winnipeg company, with 11 franchises across Canada, hang onto its market share when the Swedish giant arrives.

Dufresne Furniture's predicament begs a question that other small companies facing the entrance of a massive competitor must answer: What can you do?

The fact is that Ikea is huge. The company has 267 stores in 25 countries, with 23 billion euros in sales in 2010, up more than 7 per cent from the previous year thanks to growth in China, Russia and Portugal.

Bluntly, it owns the whole middle of the furniture market. Still, while selling furniture and housewares to the largest market in droves — its 11 stores in Canada are visited by 25 million people a year — it counts the fringe, like university students, low-income families and also some wealthy shoppers, among its customer base.

Still, Ms. Jonasson-Young remains convinced her strategy can see her company survive. She says Dufresne monitored Ikea long before it settled on the site to build its twelfth store in Canada in the southwest corner of Winnipeg.

"We consider them to be competitors, but we also believe we're not playing in the same sandbox with them," she says.

Like Ikea, Dufresne, which celebrates its 25-year anniversary this year, sells furniture, housewares, accessories and appliances. Changes won't be made by reacting to what a new competitor is doing, Ms. Jonasson-Young says. Rather, her store will stay loyal to its core market – 35- to 54-year-old women with an average household income of $50,000 to $100,000 – and ensure any changes are made with that segment in mind,

"We know very well who we are and who are customers are, but that doesn't mean we're so introspective that we're not aware of what's happening in the market," she says.

That means attending trade shows and getting involved with furniture industry performance groups that share non-competitive information.

She also runs Dufresne's buying and marketing arm that works with 60 other independent furniture stores. This group, which includes U.S. retailers, shares information and market research.

Dufresne's typical customer wants good value but also service, says Ms. Jonasson-Young — and not the kind you get in an Ikea checkout line.

"It's not just about having appropriate selling skills in place," she notes. "They're not just buying a sofa, they're buying a conversation piece for their living room, a bragging piece. It's much more about who I am and the whole emotional part of the process."

While retailing experts agree with Ms. Jonasson-Young that Ikea will grow the furniture consumer market base in Winnipeg, they're quick to point out that it will also happily capture those new customers, too.

Expanded market or not, Ikea's entry into the tight-knit Winnipeg furniture sector will have an impact on competitors such as Dufresne.

The challenge: How can a much smaller local brand like Dufresne compete with Ikea?

The experts weigh in

Philip Boname, a retail consultant and president of Vancouver-based Urbanics Consultants Ltd.

The category of furniture retailing is the first- or second-most volatile form of retailing — the other being the restaurant business. So, it's relatively low margin and that means if you have a big competitor, you can and will be vulnerable to the onslaught of a retailer with the power of Ikea.

Should they try to be more like Ikea? No, that's not a solution. On the contrary, try to come up with product types that are different. Ikea is a volume merchandiser and therefore caters to the largest market — middle-income consumers. The trick is to carry specialized products, either on the high or low end.

So for furniture retailers who have been around for some time and built up a loyal clientele, they could offer specialized merchandise that's fairly expensive, above the Ikea price range. Or, they could play in the discount field.

Willy Kruh, Toronto-based global chair of consumer markets for KPMG

Do not underestimate them. To compete with them, you'll have to have other product lines people want, competitive pricing for those products and then you are going to have to service the hell out of them.

Also, superior customer service could be a significant competitive edge. People will pay extra for a salesman who really knows the product, who will give me the added touch, know my name, follow up and understand me.

Being the homegrown story won't hurt. There is a connection people have with a retailer who has built up its success in town, made good and can provide an authentic personal touch.

Three things Dufresne should do now

• Be your own leader: Don’t try the full frontal attack against a retailing megalith such as Ikea, or you’ll get creamed. Play on the edges of the market while maintaining competitive pricing.
• Sell your service: Furniture is a big-ticket item and shoppers are going to be more comfortable making large purchases if they feel catered to and understood.
• Promote your local roots: Don’t be afraid to play up your homegrown status. If your pricing is competitive and your service outstanding, people will often make an effort to support the local player.

Special to The Globe and Mail

Have a business challenge? We can help.

Tell us the biggest challenge facing your small or medium-sized company, and let our panel of experts weigh in with smart advice. Send ideas here.