Ikea grows, Tel Aviv shrinks
If a city like Tel Aviv wishes to live, it must not sit idly by. The city's leaders should find a way to give incentives to small shops, make things easier on them, improve access to them, and attract shoppers to urban neighborhoods. The city must be protected from the forces threatening it.
Some happy news: the Swedish furniture chain Ikea has announced that it will be opening its second branch in Israel, south of Tel Aviv, in 2006. Residents of the Tel Aviv metropolitan area will soon be able to drive in their cars not only north to Netanya, but also south - apparently to the Bilu junction, although the site has not yet been finalized - to buy a "Billy" bookcase for NIS 340, a "Samtid" floor/reading lamp for NIS 175, or the "Mysinge" love seat for NIS 2,295 (including 100-percent cotton upholstery that can be removed and washed) and an end table.
Wait a sec - as long as we're here, why don't we put that "Lack" coffee table, at NIS 295, into the shopping basket, too, and also a few pots, pans and glasses? Those bright drapes are nice. The storage boxes, in creme, are just fabulous. And it's all so cheap. Pure pleasure.
Yet the news is happy only from a certain perspective, that of consumers and marketers: It is the perspective of the middle class that wants to furnish its apartments with middling quality goods and at relatively cheap prices, and the perspective of the executives of Ikea and its advertisers.
A new branch is a challenge, and an opportunity for growth. Presumably happiest of all is Matthew Bronfman, who just acquired 75 percent control of Ikea from Co-Op for approximately $38 million. Now he not only has a bank (Discount) and a supermarket chain (Blue Square), but also a furniture colossus that will only continue to grow - directors of the chain estimate that Israel will eventually have four branches.
Who will be less happy? Owners of the small shops for furniture, lamps and housewares in the centers of cities in the southern half of the metropolitan area, such as in Florentin in Tel Aviv. Dozens of families earn their livelihoods there from furniture sales, along with dozens of carpenters, painters and upholsterers. Grocery store owners and craftsmen live in symbiosis. A complex and lively urban texture could breathe its last.
The furniture chains - Ikea, Beitili and IDdesign - now control 45 percent of the Israeli market, with the remainder divided among the smaller stores. Another Ikea branch would alter the picture. Since the first branch of the chain opened in Netanya in 2001, the furniture sector has wallowed in recession, prices have dropped by 30 percent, and many of the smaller stores have closed.
In 2001, 7 percent of respondents to a survey conducted by Ikea said that Ikea was their first choice when it came to furniture. By 2004, the rate had climbed to 30 percent. Turnover at Ikea increased from NIS 211 million in 2001 to NIS 360 million in 2004, recession notwithstanding. According to the company, about 40,000 people visit Ikea each week.
How will the small business owners survive? The lighting stores on Wolfson Street in Florentin have a hard time competing with Ikea's prices - they buy in smaller quantities, pay high rent, and need to earn a livelihood. But you can certainly find sofas in these furniture stores that are as pretty and as cheap as what is available in Ikea. You only have to look - the bargains are there.
A long line of trucks waiting to haul furniture may be found on Herzl Street, but who is going to go to the trouble of wandering the streets, walking into shops and comparing prices, when Ikea is only a 20-minute drive away, and right next to a parking lot?
In any event, the consumer perspective is not the essential one - low-earning employees would be harmed by the growth of Ikea. Ikea executives refuse to reveal the percentage of their employees (a total of 400 at present) that earn minimum wage. As the number of enormous companies that hire workers at low wages for sales-assistant positions - which do not require professional training, as opposed to the craftsmen and professionals whose skills are required in the small shops - increases, there will be a commensurate increase in the pressure on the entire labor market to lower salaries and hire temporary workers. A few individuals, like Matthew Bronfman, will continue to acquire wealth, while the masses, like the Ikea sales assistants, will make this accruing of wealth possible through their own cheap labor.
Opening a branch of a massive company outside a large city has additional repercussions. Buyers driving out of the city will necessarily lead to swelled traffic on the roads and increased air pollution. Residents of the urban neighborhoods will be hurt, too: The collapse of small businesses will lead to a more stark urban life - fewer people will wander the city, browsing and buying in the shops, and as a result, fewer people will stroll through the streets, buy at kiosks or sit in the cafes.
It might be prudent, therefore, to think twice before handing the money you've budgeted for furniture to the Bronfmans. Perhaps it would be better to send some of it to other families, the petit bourgeois that keep the city going.
At the same time, it should be said that consumers have only a limited effect on the suburbanization processes that intensify urban decay. If a city like Tel Aviv wishes to live, it must not sit idly by. The city's leaders should find a way to give incentives to small shops, make things easier on them, improve access to them, and attract shoppers to urban neighborhoods. The city must be protected from the forces threatening it.