According to CEO Jesper Brodin, any new stores Ikea opens will be smaller city stores. He claims product prices are sure to drop, but home delivery will become more expensive.
No more ‘no’
Ikea’s profit is decreasing and the number of visitors to the outlets is declining: the furniture giant is being challenged by the digital age and Brodin (who came to the helm a year and a half ago) will have to make some firm decisions.
“What used to work in the past, does not work any more: in the past, we said ‘no’ too many times to customers without a car or without enough time to come to our stores outside of the cities,” the CEO of Ingka – the holding that houses 90 % of all Ikea stores explained in Belgian newspaper De Tijd.
City stores only in 30 biggest cities
Ikea will now be focusing on city stores in the thirty biggest cities of the world. Amsterdam and Brussels may be included. “That remains to be seen, because it may just work out with the current stores and furniture delivered at home,” says Brodin.
What these city stores will actually look like is not yet set in stone. That decision will have to be made later this year, based on the experiences in 25 lab stores. The ones in Stockholm, Moskou and London only sell kitchens and living rooms and in Paris there will soon be a ‘showroom store’, which displays 4500 products, but customers can only take 1500 of them home directly from the store. Larger items can be ordered and will be delivered at home.
Fixed prices down, delivery costs up
Brodin is very clear on deliveries at home: they won’t be free. The CEO has decided not to take the free route “because it would punish the customers who make their way to our stores. The lowest price will always be found there.” And those prices will become even lower over the coming years, as Ikea tries to reduce the expenses of production even further.
The CEO does realise that this means that the home delivery service will need to be expanded: online orders will be delivered by the next day, possibly even on the same day. Customers who make that choice will have to pay more. Brodin intends to make that a practical possibility by expanding some stores and turning them into fulfilment centres with even larger warehouses. By 2025, all deliveries will have to be made by electric vehicles.
Brodin wants to see the full transformation of Ikea within three years. It’s a tight deadline, especially considering that net profit for the store branch dropped by half last year and the company finances everything on its own.
