NEW YORK, N.Y. – Ikea, whose stadium-sized furniture stores draw shoppers from miles around, is going where its shopper are: online.
The CEO of Ikea Group, the world’s largest furniture chain, is pushing for sales growth, while making its ready-to-assemble furniture more accessible to customers increasingly looking for more convenience. The move comes as Ikea, which operates 315 stores in 27 countries, has been slow to respond to the changing shopping habits of shoppers who are increasingly researching and buying on their smartphones or tablets.
The Swedish company sells its products online in 13 of the 27 countries it operates in but plans to push its online offerings globally. The push is part of an overall goal to reach sales of 50 billion euros ($63.7 billion) by 2020 that was set a few years ago. The company also plans to open more stores while making the locations more inviting.
“Customers still would like to sit in the sofa and feel how comfortable it is,” Peter Agnefjail, Ikea’s president and CEO told The Associated Press in a phone interview Friday. The 18-year Ikea veteran took over the reins from Mikael Ohlsson in September 2013. But he said they also mix up online and offline shopping. “What we do see is that customers are more walking across channels in a way that is very seamless,” he added.
The focus marks another chapter in the history of Ikea, founded by Ingvar Kamprad in 1943 as a mail-order company whose stores drew 716 million visitors in its last fiscal year.
Ikea is starting to see a recovery in many of its markets, particularly its European business, which accounts for about 70 per cent of total sales and has been hampered by an economic slowdown there. But Ikea also needs to respond to increasing competition here and abroad. Abroad, there are players like Home24, a German-based online furniture startup looking to expand. In the U.S., Ikea faces fragmented competition from different types of chains from discounters like Wal-Mart and Target to chains like Crate and Barrel at the higher end.
“Ikea is still the low-priced go-to furniture place,” said Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors. But he noted everyone is trying to take a bite out of Ikea’s business.
Last month, Ikea announced 5.9 per cent revenue growth in the year ended Aug. 31 to 28.7 billion euros ($36.6 billion). That’s an increased pace from the 3.6 per cent increase in the prior year. In the U.S., total sales rose 5.4 per cent, while revenue at stores opened at least a year rose 4.2 per cent in the latest fiscal year, according to Rob Olson, Ikea’s acting U.S. president.
Agnefjail said he’s not unnerved by the recent investor fears about another recession in Europe.
“We are optimistic about what we see,” said Agnefjail, “Unemployment is stabilizing in many markets.”
Ikea also continues to focus on cutting prices on big-ticket items as it seeks to outfit more homes around the globe. Last year, it cut prices by 1 per cent, in line with the long-term average of 1 to 2 per cent. During the recession, it cut prices more than that. Ikea cuts prices by looking for new ways to cut costs. For example, shipping one sofa flat — squeezing five onto a pallet instead of three — has cut thousands of truck trips.
But Ikea is also working hard to cater to customers looking for speedier shopping.
“The store layout needs to be customer friendly. And the website is underdeveloped, and there’s a huge upside opportunity for them,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy in New Canaan, Connecticut.
Ikea says that 90 per cent of the 9,500 items offered in its stores are online, up from about half a few years ago, on a global basis. In the U.S., 70 per cent of its store products are offered online.
Ikea is also looking to offer services for online shoppers that allow them to pick up the goods at stores. Currently, that service is only available in its stores in the United Kingdom. Agnefjail noted customer traffic to Ikea.com increased to 1.5 billion customers in its latest fiscal year, up from 1.3 billion in the prior year and 1.1 billion in the year before that.
Overall, “We are just at the beginning. We are still small,” Agnefjail said.
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