In May 2025, IKEA unveiled its long-anticipated store on London’s Oxford Street. Spanning almost 6,000 square meters across three floors, this urban flagship represents more than just a new location for the homewares giant – it reflects a strategic shift in furniture retail. With a curated selection of approximately 6,000 products – approximately half the number of a full-scale IKEA – an innovative in-store experience, and robust logistics supporting omnichannel fulfillment, the new opening embodies the evolving role of physical stores in the digital age.
This move is part of a broader industry trend. According to Precedence Research, the global furniture and furnishings store market size is forecast to grow from $542 billion in 2025 to $785 billion in 2034, a compound annual growth rate of 4.2%. Flagship stores and key physical retail locations no longer function just as showrooms but as integral components of a cohesive retail strategy that bridges online and offline experiences. Brands are expanding and evolving their physical presence not as a counterweight to digital channels, but as a complement to them.
For more cutting-edge industry insights and actionable strategies, download Enhance XR’s Furniture Commerce Playbook 2025. Grab your free copy here.
Rethinking retail formats: IKEA’s new blueprint
The Oxford Street store is part of IKEA’s broader repositioning in the UK and globally. While its traditional warehouse-style locations remain central to its business model, the brand is investing significantly in smaller-format, urban-centric stores. Recent examples include three openings in cities across the UK, highlighting both the furniture giant’s multi-pronged approach and the overarching goals guiding its strategy.
“This store, on one of the busiest and most well-known streets in the world, exemplifies our ambition to innovate our retail presence and bring IKEA to where our customers live, work, and socialize.”
-Tolga Öncü, Ingka Retail Manager (COO) at IKEA Retail.
These formats prioritize proximity, convenience, and accessibility, and are explicitly designed to complement digital channels. Customers can explore a curated product range, place orders for delivery or pick-up, and consult with room planning experts for more complex purchases in-store. The brand encourages customers to engage with its 3D and augmented reality-powered apps, IKEA Place and IKEA Kreativ, to create personalized designs to share with its consultants.
This approach aligns with IKEA’s $2.2 billion investment in its omnichannel growth strategy in the U.S., focusing on expanding its retail network and digital capabilities. The investment includes customer fulfillment centers and planning studios, underscoring a strategy focused as much on infrastructure as real estate. In IKEA’s model, new stores have multiple roles: as experiential brand destinations, product showcases, and as micro-distribution hubs and service points. For city-center consumers, that means shorter delivery times, same-day pickups, and seamless handoffs between in-store advice and mobile checkouts.
Beyond IKEA: The resurgence of flagship retail
IKEA is not alone in reimagining flagship stores. A wave of investments over the past 24 months points to a broader reassessment of the role of physical retail in a digital-first era:
- Wayfair opened its first large-format store near Chicago, Illinois, in May 2024. Spanning 150,000 square feet, the space blends showroom and retail elements, with QR-enabled purchases and a seamless buying experience. In its 2024 results, the brand credited the store’s halo effect with driving 15% higher growth in Illinois than in the US overall.
- Kave Home, the Spanish furniture giant, has enjoyed sustained growth driven by its distinctive designs, smart integration of product configurators and visualization tools, and signature retail stores. The brand now boasts 12 flagship stores across Europe, with plans for seven more openings in 2025.
- Dreams, a leading UK chain, recently opened its first concept store in an upscale West London location. Designed to offer a more premium in-store experience, tailored for high street outlets, the store marks the first stage of the company’s plans for further expansion of its physical presence.
- RH has been an industry leader in positioning physical stores as experiential brand experiences with its ‘Gallery’ model. Now the upmarket furniture chain has taken the concept further with its Gallery at Aynho Park. The chain’s first European location occupies a 73-acre UK estate and fuses luxury retail, art, architecture, and hospitality into a multi-sensory brand experience.
These openings reflect increased investment in a strong brand identity, which shifts the focus from simply selling products to fostering emotional connections and delivering a unified experience across channels – a key point of differentiation in an increasingly competitive landscape.
“Storytelling plays a crucial role – showcasing the artistry, sustainable materials, and unique narratives behind each piece cultivates emotional bonds that resonate with discerning clients.”
– Rebecca Lorimer, Creative Director, Coco Wolf.
The strategic imperatives behind flagship investments
The resurgence of flagship investment speaks to several interrelated industry trends that are redefining the way furniture is bought and sold. Today’s showrooms are not just places to browse – they are part of a connected omnichannel ecosystem designed to facilitate a seamless customer journey.
1. Omnichannel integration
Today’s customer does not distinguish between online and offline – they expect both to work in tandem. Retailers are responding by designing store formats that serve as destinations, fulfillment nodes, content engines, and customer service hubs. Flagship stores, once simply retail outlets, now function as multi-purpose operational assets, designed with a balance of customer convenience and inspiration in mind.
2. Making it easier to buy
This trend aligns with a broader commercial imperative of eliminating barriers to purchase wherever possible – whatever the touchpoint. Embracing the “easier to buy” mindset means removing friction for customers through smart implementation of digital tools such as product configurators and AR-powered visualizations, prioritizing convenience through delivery and in-store collection models, crafting simplified returns policies, and creating connected brand experiences that ensure a unified customer journey through on- and offline channels.
3. Differentiation through brand identity
Flagships stores enable immersive storytelling that reflects a brand’s values, aesthetic, and customer philosophy. In an age of endless scrolling, they provide a stage for curated collections and innovative retail design that drives standout for products and builds memorability and loyalty.
4. Operational flexibility and experimentation
These stores serve as R&D labs for service design, layout strategy, and new tech. Retailers can test, iterate, and optimize – without disrupting the full store network. Wayfair, for example, has noted that its first large format store will serve as a test case, used to hone the chain’s model before scaling to further locations.
“Physical retail is more relevant than ever. Customers crave real world experiences and direct interaction with products and services. IKEA creates physical environments where people want to spend time, while also leading the industry in technology with 3D visualization, AR, and room planning built into their service offering and R&D strategy.
What stands out is that their approach is neither about pushing nor pulling customers toward stores or online channels. They are making it easy for people to choose what suits them. In an omnichannel world where buying decisions happen across touchpoints, that kind of flexibility is essential.”
- Rafael Muñoz, Founder, Enhance XR
Flagships stores as strategic assets
IKEA’s Oxford Street location is not a nostalgic revival of high-street retail – it’s a forward-facing signal of how physical retail is being reimagined for a digital world. Flagship stores are emerging as high-performance brand hubs: immersive, data-enriched, and operationally dynamic, deeply embedded in a company’s wider omnichannel setup.
While not every furniture brand has the resources to invest in city-center retail premises, the principles powering this trend are applicable right across the sector. Customers today prioritize seamless buying journeys, connected brand experiences, and convenient shopping models. Physical stores can play a key role in that, serving as inspiration and infrastructure in equal measure. Furniture brands who adapt their strategies accordingly will benefit by meeting consumers where they are – and shape where they are going.
For more insight on how to create engaging and seamless customer journeys, contact Enhance XR today for a free consultation.
