Ikea saw an overnight increase in online sales during the Covid-19 pandemic, as home – and the furniture within it – became more important than ever during lockdowns. At the same time, says Belén Frau, deputy retail operations manager at Ikea Retail (Ingka Group), the retailer effectively became a pureplay, as 75% of its shops had to close during local lockdowns. That, she says, presented the retailer with “a huge opportunity” – one of transforming its digital capabilities, which had previously lagged behind the market. “I think we needed to leapfrog our digital transformation, and we took this challenge as an opportunity to transform our business,” says Frau. “We are embracing this combination of merging our digital and physical ecosystem and at the same time to deliver a personalised Ikea experience – we have done just about everything, I would say. We have revamped our web to improve this experience. We have deployed our app, and explored new ways to launch digitally-enhanced services like seamless kitchen buying, or assembly now we have acquired have launched then deploy the app, we have explored new ways to launch the digitally enhancing service like seamless kitchen buying or assembly, now we have acquired TaskRabbit. We have also even managed to open 26 new locations.”
The retailer’s staff found new ways of working during the pandemic. They started making deliveries in response to a shortage of drivers in Portugal and a high level of online demand in the Netherlands. Drive-through collection and contactless delivery were introduced in many markets. “It’s not only about adding new customer meeting points or new services, it’s about how you make the customer experience as good as possible,” says Frau. “And, to be super honest with you, we had some catching up to do here.”
Customer-centric retail
The focus in on the customer, as Ikea moves from multichannel to omnichannel retail, in response to changing customer behaviour. Through analysing its data, Ikea is seeing shoppers shifting channels. Customers who previously bought only online, or only in-store, are now checking online or on the app before going to the store to see for themselves, buying there or buying online afterwards.
In practice customer-centric retail has led to decisions such as developing augmented reality solutions that combine Ikea’s home furnishing and product knowledge with its understanding of customer behaviour. At the same time, its stores have become warehouses, and are now almost all part of its customer fulfilment network. The retailer uses AI to forecast its fulfilment and capacity needs. “With this,” says Frau, “we are also avoiding making big investments into customer distribution centres because our stores are playing a totally new role in this omni world.” Currently around a quarter of the online orders that Ikea receives – at a rate of one every 1.2 seconds – go through stores.
The nature of Ikea’s stores is also changing it tests new formats. Its new store on Paris’ Rue de Rivoli specialises in decoration, for example, while its central Vienna store offers electric bike and truck delivery for shoppers who are more likely to arrive on public transport. Formats vary by location, as Ikea tries “to respond to the needs of the customer, depending on where they are”.
In Shanghai, its new store (pictured) offers an “experience park” where shoppers come in-store not only to buy but for the sense of community, with hubs built around food, sustainability, and around play.
Looking to the future
Another lesson from the pandemic is, says Frau, that “it is good business to be a good business. Being a good business is about more than making money.” In the light of that, Ikea has committed to becoming climate positive by 2030 – taking out more greenhouse gases from the atmosphere than it emits through steps including financing 100% renewable energy at suppliers’ sites – as it plays its part in meeting the demands of the Paris Agreement treaty on climate change. It is working with Walmart, H&M and Kingfisher on the Race to Zero campaign. and is encouraging other retailers to join it. “What we want to create is a movement in which other retailers join us and commit – because we only have one planet that we call home, right?”
Belen Frau was a panellist at World Retail Congress London summit this month.
