Digital business

IKEA: E-commerce is the future

IKEA held out against digitalisation for a long time, but now the Swedish furniture giant is going high-tech and ending the expansion of its traditional furniture stores.

Aug 14 2018

Once construction of its last furniture store in Karlsruhe, Germany, is complete, the spread of the company’s retail space onto greenfield sites will be over. Instead of more conventional stores, IKEA will focus on small, easily accessible city-centre branches in future, and it will invest in distribution centres for fast delivery and in the expansion of e-commerce.

No further expansion of conventional stores

As the new head of IKEA Germany, Dennis Balslev, recently told daily newspaper “Die Welt” in an interview: “The era of large furniture emporia on the outskirts of town is over. Online is my main focus.” For this reason, Balslev has also put an end to all enlargement and expansion plans.

For years, the number of in-store visits has been declining, especially in large cities. At the same time, online orders have seen a sharp increase. “We expect this trend to continue,” added Balslev. “So we’re changing our focus and putting a lot of investment into the expansion of online trading. After all, we are in no doubt that this is the future.”

Online business expected to see strong growth

Although IKEA currently generates only about 6 per cent of its sales through e commerce in Germany, this share is expected to rise to between 25 and 30 per cent in the medium term alone, according to Balslev. That’s why IKEA is also working to optimise its own website. In particular, the company wants to adapt to allow for shopping via smartphone.   

New apps are also currently being developed to make use of augmented reality, for example. In addition, the furniture group will soon harness the power of Instagram by presenting examples of interiors on the social network.

Investing in new distribution centres

There are also plans to invest up to €400 million in new distribution centres to speed up the delivery of online orders. In future, IKEA will aim to deliver within three hours or, at the latest, on the following day. Until now, customers have had to wait five to six days for their online orders.

IKEA is also moving in to city centres. In addition to large properties, small sales points are also a possibility – in shopping centres or department stores, for example. The company is currently testing the customer response with showrooms and pop-up stores in Madrid, Stockholm and Copenhagen. And the results are already highly promising.

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