Date
23 October 2017
IKEA has been successful in using labyrinthine store layouts to generate impulse purchases, but it is now adopting new technology to overhaul its business operations. Photo: Reuters
IKEA has been successful in using labyrinthine store layouts to generate impulse purchases, but it is now adopting new technology to overhaul its business operations. Photo: Reuters

IKEA turns to e-commerce giants to sell furniture

Amid the boom in e-commerce, brick-and-mortar retailers can’t afford to stick to their old ways of doing business.

IKEA has become the latest major retailer to radically overhaul its sales strategy in the face of online competition; it has started selling its furniture through big e-commerce websites.

“[This] is the biggest development in how consumers meet IKEA since the concept was founded,” Torbjörn Lööf, chief executive of Inter IKEA, told the Financial Times.

Lööf said the decision to turn to online retailers is part of the broader overhaul that has forced the company to turn to new types of stores, particularly in city centers.

While he declined to comment on which online retailers the company would be working with, Amazon and Alibaba are expected to be its potential partners.

Founded in Sweden and headquartered in Leiden, the Netherlands, IKEA has more than 400 stores in 49 countries. About 2.3 billion people from all over the world have visited IKEA outlets in 2017, according to the group.

Like many traditional big-name offline retailers, IKEA was slow to move online. It is now experimenting with new store formats, including city-center pick-up points and specialized pop-up stores.

As the world’s biggest home furnishing retailer, IKEA has been successful in using labyrinthine store layouts to generate impulse purchases, but it is now adopting new technology to introduce changes to its business operations.

The company recently agreed to acquire TaskRabbit, an online marketplace for freelance labor which could help customers assemble furniture. It has also launched an app that allows users of Apple devices to visualize placing IKEA furniture in their own homes using augmented reality.

“Traditionally the whole IKEA value chain has been designed to deliver to stores. That is changing and it is challenging a number of ways of doing business. We are fast learners and we are moving,” Lööf told the Financial Times.

Amid the online challenge, several major retailers such as Sears and Toys “R” Us have gone bankrupt, while others such as J.C. Penney have come under intense competitive pressure. Large malls across the United States have seen sharp declines in sales and the number of visitors to their physical stores.

Inter IKEA, the owner of the IKEA Concept and the worldwide IKEA franchisor, is in charge of the brand’s product design, manufacturing and supply chain.

For the business year that ended in August, the company reported that retail sales rose 5 percent to 38.3 billion euros (US$45.48 billion).

This article appeared in the Hong Kong Economic Journal on Oct. 11

Translation by Ben Ng

[Chinese version 中文版]

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Hong Kong Economic Journal

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