Ikea country manager David Hood has announced a $150 million investment in a new distribution centre in Western Sydney which will lay the foundation for a network of small-format pick-up stores, online shopping and home delivery by mid-2017.

Unlike the UK, where virtually everyone is within an hour’s drive from an Ikea store, on Australia’s east coast that figure is currently around 55 per cent.

When customers have to travel long distances, they’re more willing to spend hours at a time inside the vast furniture warehouse. That’s a good thing for Ikea, and it’s a business model that has worked — up to a point.

But as the Swedish company celebrates its 40th anniversary Down Under this year, it needs to reach more Australians in more ways if it’s to achieve its goal of $1.8 billion in annual sales by 2020.

Ikea country manager David Hood has just signed off on a $150 million investment in a massive new multipurpose distribution centre in Western Sydney, paving the way to make that dream a reality.

Due for completion in mid-2017, the purpose-built, 70,000 sq m centre will form the foundation for a new wave of expansion as Ikea prepares to introduce a mix of small-format pick-up stores, online shopping and home delivery.

Ultimately, Mr Hood’s plan to bring an Ikea location within an hour’s drive of 85 per cent of the eastern seaboard.

The new distribution centre, to be located near the Marsden Park store which opened in May, will replace the existing facility at Moorebank and employ an extra 50 workers for a total of 150.

“This is really the catalyst to bring Ikea to another level for the consumer,” Mr Hood told news.com.au in an exclusive interview.

“We’ve reached a tipping point now with six stores and two in planning. The small unit at Moorebank is way over capacity — to build the additional stores we need we need this purpose-built centre as we have in other countries.”

The site at Sydney Business Park has been purchased but is still subject to planning approval. Mr Hood said he expects an additional 150 workers will be employed in the construction phase, which is expected to begin by late 2016 at the latest.

A 3D render of the new distribution centre.Source:Supplied

With the capacity to store more than 106,000 pallets, it will allow Ikea to store a greater range and volume of products, create efficiencies, reduce delivery times, and provide pick-up and delivery services direct to the customer.

Only after the centre is up and running will Ikea be able to roll out its online shopping platform, currently being trialled in Ireland and the UK.

In keeping with Ikea’s theme of sustainable expansion, the centre will be powered by 4000 solar panels, feature LED lighting throughout and harvest up to 500,000 litres of rainwater.

Mr Hood sees it as a massive opportunity to take on the likes of Harvey Norman, Super Amart and Fantastic Furniture in the smaller regional centres, where many enjoy a lack of real competition.

“I don’t know if they’re complacent, but if you look from a competition point of view in a lot of these places there’s a fantastic opportunity,” he said.

“In the UK, the difference is there is an enormous competitive presence in the every market. Everyone exists everywhere. Here you tend to find either a Harvey Norman, or in Queensland maybe a Super Amart.”

That’s not to discount the growth potential in its existing locations. Last year, Ikea had 11 million visits to its five stores on the east coast. Its Tempe store, which sees 2.2-2.3 million visits a year, was designed to take more than 3 million.

“We still have enormous capacity, but there’s this issue of accessibility. Having some more stores will help enormously, and the next phase is these pick-up points,” Mr Hood said.

By August next year Ikea will have eight stores on the east coast and capacity for another three or four.

He sees room eventually for 12 full-size stores: four in Sydney, four in Melbourne, three in Brisbane and one in Canberra. Small-format pick-up locations, modelled after the one in Pamplona, Spain, will fill in the gaps in areas like southeast Queensland.

“All these different scenarios will give us a completely different level of access than we have today,” he said. “It’s a bit of a jigsaw puzzle to get this right, but we still have an awful lot of opportunity to penetrate in the Australian market.”

frank.chung@news.com.au