Ikea signals rise of millennials in Memphis
News crews invaded Ikea's new Memphis store last week and helicopters hovered overhead, carrying national consultants who advise companies where to put new businesses.
If it seemed like a lot of fuss over a mere retail store, consider the scene at City Hall two years ago, when Ikea announced its first Tennessee store at a pep rally of political and business leaders. Black curtains shrouding the Hall of Mayors were opened to reveal displays of Ikea furniture and decor.
The Swedish retailer's choice of Memphis, before Nashville, is more than a big box home furnishings store with a fervent fan base planting its flag beside Interstate 40 near Germantown Parkway.
It's seen as a civic coup, a booster shot for the economy, and a clarion call, especially to a younger audience, that the Bluff City is a hip place to live, work and play.
The store at 7900 Ikea Way will welcome its first customers at 9 a.m. Wednesday after a dedication ceremony featuring a Swedish diplomat and a traditional Scandinavian log-sawing good luck ceremony. Ikea plans a raft of giveways, giving incentive for customers to line up and camp out starting at 9 a.m. Monday.
Political and business leaders and retail and marketing experts believe Ikea's presence should inspire confidence in the community psyche, draw visitors from hundreds of miles away and gin up further growth in the city's retail base.
"It definitely sends a strong message to the nation and site consultants, but it should especially send a message to Memphians that the place you call home is really a very attractive place," said Phil Trenary, chief executive of the Greater Memphis Chamber.
Chamber officials pointed out the big blue Ikea store to site selection consultants last week during helicopter flyovers that were part of its "Blue Carpet" tour that primarily showcased Memphis's water-related assets.
Marketing professionals said Ikea's arrival is a sign the city is building its brand and doing the right things to attract younger population growth.
“Ikea investing in Memphis is an indicator that our city is attracting and retaining a strong millennial workforce and that additional growth is anticipated," said Lori Turner-Wilson, chief executive of RedRover sales and marketing strategy.
Only last summer ServiceMaster selected Downtown for its new headquarters after declaring it wanted a head office in a city appealing to the up-and-coming generation of 20- and 30-year-olds, a group known as millennials. About 14 percent of metro area residents are in that age range, ahead of the national average and cities including Atlanta. Memphis ranked third this year as the most popular city for millennials to purchase a home, according to Realtor.com.
"The Ikea brand has amassed a worldwide following of style-conscious millennials looking to furnish their apartments," Turner-Wilson said "The cult-like appeal of the brand has as much to do with its guerrilla approach to marketing as it does the obvious function-focused design choices, the affordability of the brand, and the company’s low-key sales approach," Turner-Wilson said.
"To demonstrate the durability of its products, the furniture retailer outfitted four Paris subway stations with its couches and lamps for two weeks. The furniture giant also began operating a water taxi to help New Yorkers access its Brooklyn store. This is how you win hearts and minds," Turner-Wilson added.
The store is already helping drive growth in the city's biggest concentration of commercial development, anchored by Wolfchase Galleria, retail real estate specialists said.
"I really think it's kind of a barometer for Memphis and that area of Memphis to say 'We got Ikea, we got a Cheesecake Factory, we got both of these one and done guys.' It's a pretty significant feather in the cap," said Danny Buring, a partner in the Memphis office of The Shopping Center Group. Cheesecake Factory, another sought-after national brand, announced a Wolfchase Galleria location two months after Ikea's announcement and opened in September.
Parrish Taylor, a vice president with CBRE real estate, said Ikea is a tonic for a maturing commercial district. "Adding an exciting 270,000 square foot user with a cult-following is truly a steroid shot of energy. Bringing in two million visitors per year, many of which will be from out of town, is fantastic for the area and Memphis as a whole.”
A ripple effect is already evident, Taylor said.
"We are seeing continued interest in the I-40/Germantown Parkway area, including some redevelopment of existing older assets," Taylor said. "Other land near Ikea is now valued much more strongly. Also in the area, Brixmor redeveloped their World Market site with the highest rents in the market and may do the same with other sites, and The Commons at Wolf Creek currently has a large alternative retail user eyeing their box availability.”
Buring doesn't believe Ikea will siphon business away from nearby retailers including Costco, Target, Kohl's and Ashley HomeStore.
"My thinking is it's going to help everybody," Buring said. "It's going to be more of a one-stop-shop. With furniture shopping there's still a lot of look and touch and feel. Even though Ikea's completely different from Ethan Allen or Ashley, if you're going to furniture shop you're going to go to a lot of places."
The one-level store cost $64.3 million to build and is expected to generate at least $50 million in sales in its first year. Sales could approach levels seen at the most recent Memphis big box to open, the slightly larger Bass Pro Shops at The Pyramid.
Sales taxes, jobs and economic impact were reasons the Ikea project won about $11 million in public incentives, including city and county property tax abatement.
Ikea, known as a progressive employer with good wages and excellent benefits, opens with about 225 employees in Memphis. This week Ikea said it was extending paid parental leave of up to four months to all U.S. workers welcoming new babies.
Memphis is Ikea's 43rd U.S. store and 392nd globally.
Memphians seemed to delight in the fact that the store will attract customers from Nashville, which has been clamoring for its own store.
Memphis Mayor Jim Strickland said, "I'm glad Ikea's first store in Tennessee is opening right here in Memphis, and I'm especially excited that Ikea is bringing good jobs with benefits to our city."
Trenary recalled how he kept Ikea's Memphis decision secret when he attended a governor's economic development summit a few weeks before the announcement in December 2014. "All the talk was about whether there would be a store in Nashville. They would have definitely bet on Nashville," he said.
Ikea makes the chamber's job easier, Trenary said.
"This is a global brand and a global brand helps us attract other global brands," Trenary said. "There are retailers that are looking, that we know. It's very fair to say companies are giving Memphis a second look."
Apryl Childs-Potter, founder of Hyphen Market Solutions, considered Ikea's choice of Memphis significant "because the chain is very forward thinking in their approach to new markets. Ikea choosing Memphis, particularly over other potential Tennessee locations for its first store in the state, means they see growth opportunity and value in this market."
"Ikea’s prescience here confirms that Memphis is an economic environment worth investing in for major retailers. I won’t be surprised to see other national retailers to follow suit," Childs-Potter said.
Buring said Ikea, like Bass Pro's Pyramid store, will pull most of its business from a 100-mile radius, and some customers will travel further.
Kevin Kane, Memphis Convention & Visitors Bureau president, said he wouldn't be surprised if more than half Ikea's sales come from outside the Memphis metro area. The store could draw visitors for overnight hotel stays, but almost certainly will give many tourists a reason to extend a stay in Memphis.
"From a tourism perspective, I think Ikea to Memphis is as significant as when Tanger Factory Outlet opened in Southaven," Kane said. "Big-time factory outlet malls are tourism draws, and I feel the same way about Ikea. It's a product that has an enormous amount of popularity, and it's not in this area."
The 310,000-square-foot Tanger, which opened a year ago, is larger than the Ikea complex and features higher-end offerings, but Ikea might draw people from farther away owing to a novelty factory and the niche's devoted following.
"The brand is associated with a minimalist, urban style that has typically been reserved for the world’s largest, most posh metropolitan cities. Ten, maybe even five years ago, you didn’t see this chain anywhere in the South," Childs-Potter said.