Talk that IKEA is poised to build a store in Newcastle will warm the hearts of the Swedish furniture giant's passionate fans and chill the bones of its competitors in the Hunter furniture market.
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The company told the Newcastle Herald in a statement that it was "always exploring opportunities to expand and be more accessible to more people, however, we do not currently have plans to open a store in the greater Newcastle area".
But IKEA is notoriously circumspect when it comes to its expansion plans, and it is no secret it has been eyeing off land at Boolaroo for many years and talking to local decision-makers.
The Newcastle Herald has been told that representatives of IKEA and American retailer Costco were in the room when NSW Parliament passed legislation in August to compulsorily acquire the former Pasminco lead smelter site after years of roadblocks.
Lake Macquarie City Council has started the process of rezoning part of the land to accommodate the large retailers, which will sit alongside the four-year-old Bunnings warehouse.
Green Capital, the company behind a 750-lot residential subdivision on the 92-hectare Boolaroo site, is poised to buy the land from the government then negotiate with the major retailers.
Mayor Kay Fraser said on Friday that she expected about 170 lots to be "released" in the next month "and the rest will come from that".
"We'll probably see some development applications lodged with council for some large-format bulky goods that will be going in here," she said.
Asked if this meant IKEA and Costco, she said: "I'm pretty hopeful. They did put their toe in the water before. I understand they're very keen on this site. They know this is a strategic location to have something like a Costco and IKEA here."
IKEA's three Sydney warehouses attract a pilgrimage of fans from the Hunter and the Central Coast, but that will change if the so-called "category killer" sets up shop in Newcastle.
Industry sources in the Hunter said IKEA had the potential to attract businesses to Boolaroo but take customers away from other suburban "homemaker" centres.
Hunter Business Chamber chief executive Bob Hawes, a former boss of Lake Macquarie council's economic development arm, Dantia, said the "trade areas" of companies like IKEA and Costco would be "enormous".
"They'd be drawing circles around the Central Coast and Mid North Coast, right up into the Hunter Valley, as opposed to the average discount department store which might only be going out for a range of 10 or 15 kilometres at the most," he said.
IKEA is the largest furniture retailer in the world, employing more than 200,000 people in 423 stores across the globe.
Its late founder, Ingvar Kamprad, established the company as a 17-year-old in 1943 and by the time of his death last year was worth somewhere between $3 billion and $58 billion, depending on interpretations of IKEA's ownership structure.
The firm's revenue in 2018 was $60 billion.
It has even spawned its own psychological phenomenon, the IKEA effect, in which customers place a disproportionately high value on products they have helped assemble.
IKEA has embarked on a strategic shift recently towards online shopping and opened a small "planning studio" in the Warringah mall this year.
IKEA's a bit of a love-hate. You're either an IKEA person or you're not. There are people who are passionate about it and would go to Sydney for it, and they're people who already shop there anyway.
But the Newcastle Herald has been told the company plans to build one of its big-format stores at Boolaroo.
Such a store in Newcastle would employ an estimated 500 staff, but it remains to be seen how it will affect the furniture trade in the region.
IKEA's products extend beyond household furniture to include kitchen wares, manchester, office furniture and complete kitchens and wardrobes.
"In the old term they used to use, they are a category killer," Mr Hawes said.
"They intend to set up as a one-stop shop, and as a consequence it depends on what that customer response is.
"Those impacts on the edges will be quite small, but, as you get closer and closer to where the customers find it far more convenient to drive, the competitive impacts are going to be far greater."
One Newcastle retail manager who wanted to remain anonymous said IKEA's pricing and popularity would affect existing traders.
"I think it was only a matter of time until they came into the area. It would have been on other retailers' radars," she said.
"IKEA's a bit of a love-hate. You're either an IKEA person or you're not.
"There are people who are passionate about it and would go to Sydney for it, and they're people who already shop there anyway."
Churchills Carpet Court boss Paul Murphy said most people in the region, with the likely exception of competing retailers, would welcome IKEA's arrival.
"When you look at what they sell, it's everything. It's enormous. If you said to me they were going into floor coverings, I'd probably be a bit concerned," he said.
"From a retailer's perspective, anything that stops people going to Sydney and spending money and stays within our area up here, I think that's good.
"They are a drawcard. They are a demand product that's out there in the market, and, unfortunately, it wouldn't matter what our other people offered, they'd never have the complete offer IKEA can give.
"As sad as it is to see the effect on smaller retailers, I think they still have a position in the marketplace.
"You've just got to change your model to fit into it."
One school of thought is that a store like IKEA will attract other businesses to set up shop nearby, but Mr Hawes said the chamber was also aware some rivals stores will lose out.
"There's only so many dollars that go around," he said.
"From the chamber's point of view, we welcome competition and diversity, but we are concerned that competitive impacts aren't such that it affects the overall viability of small businesses.
"With the boom that's happened as a consequence of lifestyle shows and people doing their own thing, hopefully that market sector's grown so you don't see too much direct or indirect impact on existing traders up here.
"You cannot dismiss that there would be some competitive impacts.
"Whether they are significant enough to impact the viability of individual businesses is one matter.
"The more important matter is, as big stores like that can dominate a market, whether the impact spreads to affect the viability of the sector.
"I don't think that'll be the case, because, as I said, I think they would have done their numbers pretty carefully."
Costco, among the world's biggest retailers, is understood to be further down the track than IKEA when it comes to setting up shop at Boolaroo.
The company works on a membership model (only members can enter their stores), offering a range of discounted products, mostly in bulk.
The retailer walked away from the negotiation table last year with the Boolaroo land's former administrator, Ferrier Hodgson.
Professional services giant KPMG bought out Ferrier Hodgson early this year, removing one of the impediments to the land sales going ahead.
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Michael Parris
Michael Parris reports on politics for the Newcastle Herald. He started at the Herald in 1994 after working in the ABC Newcastle newsroom. Michael spent much of his career as a sub-editor before moving into political reporting in 2017. He was a finalist in the Sports Australia national media awards for his stories about a male-only tennis club in Newcastle. He has covered NSW and federal elections, state and federal budgets and local politics. He has also written extensively about the COVID-19 pandemic with a special focus on data analysis and the effects of lockdowns on the Hunter community.
Michael Parris reports on politics for the Newcastle Herald. He started at the Herald in 1994 after working in the ABC Newcastle newsroom. Michael spent much of his career as a sub-editor before moving into political reporting in 2017. He was a finalist in the Sports Australia national media awards for his stories about a male-only tennis club in Newcastle. He has covered NSW and federal elections, state and federal budgets and local politics. He has also written extensively about the COVID-19 pandemic with a special focus on data analysis and the effects of lockdowns on the Hunter community.
