Ikea turns to ecommerce sites in online sales push

Ikea has become the latest big-name retailer to radically overhaul its sales strategy in the face of online competition, launching a test to sell its flat-pack furniture through big ecommerce websites amid a fall in visitors to its out-of-town outlets.

Torbjörn Lööf, chief executive of Inter Ikea, said the decision to turn to online retailers — which could include Amazon and Alibaba, though he declined to comment on who he would be working with — is part of a broader overhaul that has also forced the company to turn to new types of stores, particularly in city centres.

“[This] is the biggest development in how consumers meet Ikea since the concept was founded,” he told the Financial Times.

Mr Lööf’s overhaul comes amid unprecedented upheaval in retailing, with some of the world’s best-known chains, including Sears and Toys ‘R’ Us, pushed into bankruptcy and large malls across the US suffering drops in sales because of shoppers moving online.

Amazon has threatened to spread disruption throughout the retail sector, most recently moving into groceries with its $13.7bn acquisition of Whole Foods and starting its own clothing line.

Ikea’s move comes as other large retailers are also scrambling to adjust. Walmart is moving to streamline its returns process at bricks-and-mortar stores, arguing its physical presence in thousands of markets gives it an edge over Amazon, which requires shoppers to return items through the post. Walmart has vowed customers will be in and out of their stores in about 30 seconds when making a return.

Ikea, like many traditional high street names, was slow to move online. There was heavy internal resistance to interfering with its successful business model of using labyrinthine store layouts to generate impulse purchases and requiring shoppers to drive to stores and construct their own furniture.

But the world’s largest furniture retailer is looking at changes to all parts of that model. Mr Lööf said a priority would be to offer its full range of goods online in all countries. Ikea is also experimenting with new store formats including city-centre pick-up points and specialised pop-up stores as well as smaller shops that have fewer car parking spaces and less inventory.

“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,” Mr Lööf said.

Ikea also recently agreed a deal to buy TaskRabbit, a pioneer of the gig economy that could help it offer assistance with furniture assembly to its customers. It also launched an app that allows users of Apple devices to visualise placing Ikea furniture into their own homes using augmented reality.

Ikea’s shift on giving customers more choice in terms of delivery or help with assembly moves away from its founder Ingvar Kamprad’s idea that getting customers to build their own furniture would keep costs down.

But the push to sell through ecommerce retailers could be the biggest change yet, marking the first time Ikea has sold products through a third party and radically revamping its business model.

“We want to learn, and know what it is for a company like Ikea to be there. We want to find out how we could keep our identity on a third-party platform,” Mr Lööf said.

Following a recent internal shake-up in Mr Kamprad’s empire, Inter Ikea has been strengthened. It is now not just the owner of the Ikea brand and concept but also in charge of product design, manufacturing and the supply chain. It purchased the latter responsibilities from Ikea Group, which is now solely concentrated on being a retailer.

Mr Lööf’s move came as Inter Ikea said that total sales in the business year until the end of August had risen 5 per cent to €38.3bn. Ikea Group, which accounts for about 94 per cent of sales with the rest made up by other franchisees, reports its own numbers on Tuesday.

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