Will a radical transformation lift or sink IKEA?
IKEA has announced a major reset that includes the international furniture retail giant making significant commitments to urban stores, online sales and delivery.
“We see of course that the world around us is changing,” Tolga Oncu, IKEA’s head of retail, told The Wall Street Journal, ”and we want to be part of that.”
The program includes:
- Urban focus: Thirty stores are set to open in urban centers in a further push to be “more accessible” to customers. The stores will be about a quarter the size of IKEA’s traditional big boxes located on the outskirts of town.
- Tweaked layout: With 80 percent of IKEA customers researching online before visiting stores, management will reduce the number of products displayed on selling floors and instead use the space to create mock ups of living rooms, kitchens and bedrooms. The mock ups are intended to help shoppers see how furniture fits together and bring a more experiential element to stores that’s not available online.
- More delivery: Building on last year’s acquisition of Task Rabbit that supports at-home assembly, IKEA is planning new warehouses, pickup points and other fulfillment investments.
- Layoffs and hires: Management intends to cut about 7,500 jobs, mainly administrative staff seen as redundant, in part to speed decision making. Another 11,500 will be hired over the next two years to support the new urban stores and investments in delivery, digital and in-store experiences. IKEA has about 160,000 employees.
The privately-held Swedish retailer has admitted in recent years that its out-of-town warehouses are becoming less relevant to increasingly urban-based populations and its websites have focused too much on driving store traffic rather than online purchases. IKEA has also said it would test selling its furniture on third-party websites.
“In the U.S., we’ve been on this journey for quite some time,” said Lars Petersson, country manager, IKEA Retail U.S., in a statement. “We have already made significant investments to enhance our e-commerce experience and service offerings, including new lower priced shipping & delivery, Click & Collect, financing and TaskRabbit assembly services. We are investing in existing stores to ensure they provide our customers with a refreshed family-friendly experience, filled with inspiration.”
- IKEA announces next step of its business transformation – IKEA
- We are building the IKEA of the Future – IKEA
- IKEA to Slash Thousands of Jobs in Restructuring – The Wall Street Journal
- IKEA Just Announced Some Radical Changes That Will Change Everything You Think – Inc.
DISCUSSION QUESTIONS: Do you see IKEA’s shift to smaller, city-center stores and heightened focus on online delivery as smart moves? What should the company retain from the traditional IKEA business model?