Ikea looks beyond its stores, expands into online markets

Ikea, whose stadium-sized furniture stores draw shoppers from miles around, is going where its shopper are: online.

 

Ikea, whose stadium-sized furniture stores draw shoppers from miles around, is going where its shopper are: online.

 

The CEO of Ikea Group, the world's largest furniture chain, is pushing for sales growth, while making its ready-to-assemble furniture more accessible to customers increasingly looking for more convenience. The move comes as Ikea, which operates 315 stores in 27 countries, has been slow to respond to the changing shopping habits of shoppers who are increasingly researching and buying on their smartphones or tablets.

 

The Swedish company sells its products online in 13 of the 27 countries it operates in but plans to push its online offerings globally. The push is part of an overall goal to reach sales of 50 billion euros (US$63.7 billion) by 2020 that was set a few years ago. The company also plans to open more stores while making the locations more inviting.

 

Ikea is starting to see a recovery in many of its markets, particularly its European business, which accounts for about 70 percent of total sales and has been hampered by an economic slowdown there. But Ikea also needs to respond to increasing competition here and abroad. Abroad, there are players like Home24, a German-based online furniture startup looking to expand. In the U.S., Ikea faces fragmented competition from different types of chains from discounters like Wal-Mart and Target to chains like Crate and Barrel at the higher end.

 

Last month, Ikea announced 5.9 percent revenue growth in the year ended Aug. 31 to 28.7 billion euros (US$36.6 billion). That's an increased pace from the 3.6 percent increase in the prior year. In the U.S., total sales rose 5.4 percent, while revenue at stores opened at least a year rose 4.2 percent in the latest fiscal year, according to Rob Olson, Ikea's acting U.S. president.

 

Ikea also continues to focus on cutting prices on big-ticket items as it seeks to outfit more homes around the globe. Last year, it cut prices by 1 percent, in line with the long-term average of 1 to 2 percent. During the recession, it cut prices more than that. Ikea cuts prices by looking for new ways to cut costs. For example, shipping one sofa flat — squeezing five onto a pallet instead of three — has cut thousands of truck trips.

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