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IKEA presently only generates around 6 percent of sales via ecommerce. Up to this point, the Swedish-founded company has been resistant to going all in on online sales. However, with those proportions predicted to rise to around 25 to 30 percent in the medium term, the time has come for the Swedish furniture giant to start taking eTail seriously.
Infrastructure
The first step in their plan is to cease the expansion of traditional IKEA brick and mortar stores. The new location now being completed in Karlsruhe, Germany will be the last of the large-scale IKEA superstores, and the company will instead be focusing on smaller locations which will serve as showrooms from which products can be viewed before completing the order online.
The company is currently testing this concept with showrooms and pop-up stores in Madrid. The first of these small scale stores is set to open in 2019 in New York with 30 more planned for over the next three years. With showrooming (the consumer practice of viewing products in a shop and then purchasing them online) becoming ever more commonplace, this could provide one way of embracing the concept rather than trying to fight it.
"We recognize that we are in a rapidly changing retail environment, and to be fit for long-term growth, Ikea is transforming in a way that lets us meet our customers where they are," said Manager of IKEA's US retail division, Lars Petersson. "New York City is the natural choice to open the first city center store -- the most vibrant, dynamic city in the US, and the epicenter of retail, business, and culture."
Augmenting this new store philosophy will be a EUR400 million investment in new distribution centers which will be strategically placed to speed up the IKEA delivery service. IKEA presently has an average delivery time of five to six days for online orders, but the new distribution center network will aim to bring that time down to an average of just three hours.
This dramatic reduction in target delivery times demonstrates IKEA's commitment to online. While lead times of a week or longer are typical in the traditional furniture buying process, eTail customers expect a significantly prompter service.
"The era of large furniture emporia on the outskirts of town is over," said CEO and Country Retail Manager for IKEA Germany, Dennis Balslev. "Online is my main focus. For this reason, IKEA has also put an end to all enlargement and expansion plans. We expect this trend to continue 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."
Those of us in the West won't be too familiar with WeChat yet, but the mobile messaging platform is one of the world's largest and most powerful of its kind. In Asia, the app has over one billion active monthly users and has a wide range of functions and platforms which can operate through it.
(Image source: jiagle.com)
Having historically struggled to find a foothold in the region, IKEA is using the WeChat platform to help penetrate the Chinese market.
IKEA is taking advantage of the ecommerce and payment facilitating aspects of WeChat to run limited "IKEA Home Flash Store" sales. Offering five home inspiration collections on a limited basis, customers can complete their purchase in WeChat itself or through the IKEA website. They can then have the products delivered to their home or another address of their choosing (such as to a friend using the gifting options). Sharing options allow customers to share the purchase with their contacts on WeChat to help promote the sale even further.
In addition, IKEA has launched IKEA member centers, IKEA home guides, and other functions based on WeChat's capabilities. Offline collaboration experiences such as virtual shopping bags are also under development. Details are presently scant on these, but they will certainly be ones to watch as we move through 2019.
Final Thoughts
IKEA may have been late to the ecommerce party, preferring instead to concentrate on its famous large stores, but it's certainly playing catch up now. Not only is it creating brand new infrastructure and stores to facilitate its new online focus, but it's also deploying innovative technology to help it access markets such as China in which it has traditionally struggled.
Restructuring for ecommerce and entering new markets are sure to be hot topics at eTail Canada 2019, being held in May at the Hyatt Regency Toronto, ON.
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