The Benefits of Opening an Ikea Store in Carleton Place

Date:          June 28, 2013

To:          Stephen Nelson, CEO, IKEA Canada

From:          Pei Zhu, Vice President of Marketing, IKEA Canada

Subject: The Benefits of Opening an IKEA Store in Carleton Place

In accordance with your request, I am pleased to present an analysis that is aimed at explaining the opportunities offered by the opening of an IKEA store in Carleton Place. Subject to your approval, this analysis will serve as the basis for a presentation that will be made in the next few days to the municipal government of Carleton Place. The analysis includes an assessment of the benefits that opening an IKEA will bring to Carleton Place, which is a town in eastern Ontario positioned between Perth, Almonte, and Smiths Falls. The resulting benefits will be eventually distributed across the local community, consumers, and employees.

Community Improvement

The arrival of IKEA in Carleton Place will not only enhance the local reputation, but it will also promote the town’s economic development. On the one hand, if IKEA opens a store in Carleton Place, many people from the surrounding region and beyond will go there because of IKEA’s popularity. Meanwhile, more visitors will become familiar with Carleton Place and this will stimulate tourism over the long term. In addition, the expansion of IKEA to Carleton Place will cause visitors to purchase not only items at the IKEA store but also goods and services at smaller shops in the town. A recent study found that communities with big-box stores have greater sales and more robust economies than neighbouring communities (Ott, 2008). Moreover, the overall increase in IKEA’s retail sales will ultimately lead to a net sales-tax gain for the host community. This expansion of Carleton Place’s sales-tax revenues will augment the municipality’s ability to deliver key public services to the population, including improvements to roads and sewers. Finally, the expansion of economic activity will lead to increases in the market value of real estate and hence to increases in the municipality’s ability to collect property taxes, which are based on property values. Thus, the growth in the total value of the property taxes that are collected will further augment the municipality’s financial capacity to deliver important public services.

Consumer Satisfaction

Opening an IKEA store in Carleton Place will bring a wide variety of advantages to customers. Firstly, consumers will benefit from the fact that big-box retailers offer substantially lower prices than their competitors. The direct savings enjoyed by the individuals who shop at these large retail stores as well as the indirect savings enjoyed by all local consumers due to stiffer competition, which reduces prices at other stores, are substantial (Irwin & Clark, 2007). Secondly, IKEA provides customers with excellent product quality and comprehensive and thoughtful service, such as home delivery, an assembly service, shopping tips, and an installation service. These benefits will ensure high customer satisfaction. Most importantly, citizens’ index of well-being will be increased because retailers in the community will offer a broader variety of goods and services to the local people and will do so in a manner that is convenient for their customers. The increasing happiness and satisfaction will make citizens more enthusiastic about giving back to the community through, for instance, charitable initiatives. The growth in happiness and satisfaction will also help local politicians to win re-election.