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Ikea is ramping up its bet on smaller city-centre stores and planning studios for kitchens, as the world’s largest furniture retailer tries to cut its dependence on selling only through giant out-of-town warehouses.
The chief executives of the two biggest companies in the flatpack empire told the Financial Times that an experiment on new store formats had shown customers were not so interested in pick-up points, which have struggled in countries such as the UK and Norway.
But smaller city-centre stores opened this year in Paris and Moscow had proved a success, with 1.3m people visiting the La Madeleine shop in the French capital in the first five months and sales levels running just below that of a warehouse six times the size.
“We opened more city stores than flagship stores for the first time last year. We test anything we can dream of. We are exploring what makes sense for people in terms of physical meeting places,” said Jesper Brodin, chief executive of the main Ikea retailer Ingka Group.
Torbjorn Loof, head of the owner of the Ikea brand and concept Inter Ikea, added in a separate interview: “We’re entering more new markets than we’ve ever done before . . . This is the new approach for Ikea to be more open and test new things.”
Ikea is in the middle of what both executives have dubbed its biggest and most important transformation since it was founded in the Swedish countryside 76 years ago. It is changing all aspects of its previous model of forcing customers to travel to warehouses on the outskirts of cities to collect and then assemble their own furniture.
Ikea has made a big push into ecommerce and revealed on Wednesday that online sales had increased by 43 per cent in the year to the end of August to make up 7 per cent of total revenues. Revenues increased by 6.5 per cent to €41.3bn while like-for-like sales, which strip out the effects of new stores, rose by 1.2 per cent. Ikea reports profitability and other figures later in the year.
Ikea opened 10 flagship stores, nine planning studios and two smaller city-centre stores last year. It recently opened a kitchen planning studio in Copenhagen and has plans to open smaller stores in Queens in New York and Tokyo, where it will focus on small-space living.
Ikea has also launched several trials into renting out furniture with Mr Brodin saying early results suggested it was particularly attractive for students as well as some short-term expatriate business workers. “We are cracking some of the practicalities around financing,” he added. It is also offering more services such as assembly to customers as well as using its existing stores as distribution points for online sales.
Asked whether a move from one sales model to a number of experiments was challenging, Mr Brodin replied: “It’s an era where what we’re doing is we’re allowing ourselves a greater degree of entrepreneurship. There’s a risk of fragmentation or you might even say brand damage. But we’re not seeing it at all like that. The speed of change and with consumers is speeding up and we need to keep up.”
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