Ikea plans to cut 147 jobs in closing Napa Valley fulfillment center

After six years in Napa Valley, the world’s largest furniture retailer plans to cut 147 jobs there in late spring as it shuts down its massive order-fulfillment warehouse in American Canyon.

The U.S. distribution arm of Ikea plans to lay off 22 workers at the 1 Middleton Way facility starting June 1 and wrap the rest of the layoffs by the end of February 2025, according to a state filing.

Leased in September 2017 and opened early the following year, the 646,000-square-foot building was among the first two U.S. facilities the company planned to be part of a new focus on shipping large and bulky items to the homes or businesses of shoppers who ordered them online or bought them at Ikea stores, the Journal reported at the time.

Those two warehouses, the other one in Dayton, Texas, would complement the five large distribution warehouses the retailer had at the time to serve the stores.

Ikea said the decision to close the Napa Valley site came as part of its long-term fulfillment strategy and “to provide seamless service to our customers, optimize our resources and position ourselves for growth.”

“The American Canyon (customer distribution center) has played a crucial role in getting our products to our customers in the west, and we’re incredibly grateful to the co-workers who help make this happen. We understand the impact this decision has on our co-workers, and we’re committed to supporting them during this transition,” a spokesperson wrote in an email.

One of the reasons Ikea originally picked the American Canyon location to serve Northern California was the lack of large distribution warehouse spaces along the Interstate 80 corridor in Solano County, connecting the San Francisco Bay and Sacramento metropolitan areas, according to Brooks Pedder, a CBRE real estate agent who brokered the 2017 lease deal for the property owners.

“When we did the Ikea deal, there were no large warehouses on Interstate 80 in Solano,” Pedder said. “We were ahead of the time. Not anymore.”

But a lot has changed since then both in Ikea’s approach to direct-to-consumer order fulfillment and in the availability of big warehouses locally.

The surge early in the pandemic in online orders, particularly to outfit home offices, accelerated Ikea’s in-motion plan for two smaller tiers of stores, than its half-million-square-foot stores, Forbes reported in 2021. Then a year ago, Ikea announced it would be investing more than $2.2 billion through 2026 on opening smaller stores and increasing order-fulfillment capabilities, both from 900 new pickup locations and modernizing stores to be bases for customer shipments.

Ikea said the order volume handled in American Canyon will be redistributed to its stores and central fulfillment units in the region.

“We’re working to increase our store fulfillment capacity so that stores can pick orders both for Click & Collect and for delivery to local customers,” the spokesperson wrote. “Increasing fulfillment capacity in stores means less pressure on distribution centers and faster, cheaper delivery to customers. Delivering directly to customers from their local stores saves time, labor and delivery mile emissions, while keeping the CDCs available for longer distance deliveries.”

The 1 Middleton building was the third-largest single commercial building when it was finished in 2016, after the 833,000-square-foot former Savemart warehouse in Vacaville (now occupied by Serena & Lily and 24 Seven) and the 744,000-square-foot Biagi Bros. and Jackson Family Wines warehouse nearby in American Canyon.

Since 2016, several million square feet of warehouses have been built in Solano and Napa counties, including a 702,000-square-foot building in the same Napa Logistics Park development as 1 Middleton and Vacaville’s 1.23 million-square-foot facility reaching completion for Amazon.

A key issue for the 1 Middleton building for fulfillment of orders outside Napa County is traffic in both directions via Highway 12 connecting to Interstate 80, Pedder said.

He said that the space is being listed now for a replacement tenant ahead of the lease expiration in February 2025.

In its most recent fiscal year, ending in August 2023, Ikea opened 71 new stores, the majority of which were smaller stores or Plan & Order locations. Global retail sales last fiscal year were 47.6 billion euros ($51.4 billion). Ikea is a Swedish-founded retailer, but it is owned by a Dutch holding company.

Jeff Quackenbush covers wine, construction and real estate. Reach him at jquackenbush@busjrnl.com or 707-521-4256.