Swedish furniture retailer opened 19 click-and-collect locations, up from three last year
IKEA’s click-and-collect location at the Westfield mall in Stratford, East London. The furniture giant is opening more of the smaller-format shops as it seeks to boost its online revenue. PHOTO: IKEA
IKEA is thinking outside the big box.
The world’s largest furniture retailer on Tuesday said it had opened more click-and-collect locations in fiscal 2016 than traditional stores, marking a shift in the company’s expansion strategy.
“This is part of the total conversion of IKEA from a traditional brick-and-mortar retailer to a multichannel retailer with the stores at the heart,” said Chief Executive Peter Agnefjäll in an interview.
His comments come as IKEA reported sales in the 12 months ended Aug. 31 were €34.2 billion ($38.4 billion), up 7.1% from a year earlier. Same-store sales climbed by 4.8%.
The Swedish company has for decades followed a successful model of opening sprawling, out-of-town stores that act as showrooms, storage depots and restaurants. IKEA opened its first 72,000-square-foot store in 1958 in the Swedish village of Älmhult, discovering that people were prepared to travel long distances to visit the shop.
But as e-commerce has become a bigger growth driver, IKEA has recently begun rolling out centrally located click-and-collect points, averaging 20,000 square feet, that allow customers to collect online orders and carry a limited range of products for immediate purchase. Home-furnishing experts are available to help customers plan big purchases like kitchens or wardrobes.
The company opened its first click-and-collect location in Pamplona, Spain, in March 2015 and has since expanded them to 11 countries. Some of the locations include a cafe, helping IKEA drive more revenue from fare like its meatballs and salmon.
The company has paid more attention to its food business in recent years, with its restaurants attracting customers and helping physical stores stay relevant, Mr. Agnefjäll said. Food makes up about 5% of IKEA’s overall revenue and the company has recently taken a creative approach to driving sales, setting up pop-up cafes in London that offer breakfast in bed or teach Londoners how to cook meals free.
On Tuesday, IKEA said it had opened 19 click-and-collect points in the past year, a big jump from the three click-and-collect points it opened in fiscal 2015. Last month, the company opened a 9,700-square-foot collection point in London’s Westfield mall in Stratford, its fourth click-and-collect point in the U.K.
Mr. Agnefjäll said IKEA is using its 22 click-and-collect locations as testing ground for how many and what sorts of products the company should stock, as well as which locations do well, based on factors like their distance from traditional IKEA stores.
The company opened 12 new traditional stores, down from 13 a year earlier.
Mr. Agnefjäll said e-commerce sales made up about 4% of overall revenue, up from 3% the previous year. IKEA has been pumping money into upgrading its website and sales-order-management tool. The company is also investing in expanding its distribution network as it rolls out click-and-collect more widely.
IKEA is still some distance from its ambitious target of raising sales to €50 billion by 2020, which it hopes to reach by expanding to new markets, offering more products online and opening new stores in existing geographies.
In fiscal 2016, sales climbed 7.9% at constant currency compared with the 8.9% rise the company logged in the previous fiscal year.
The Swedish retailer said it is on track to open its first stores in India and Serbia during the coming year. Mr. Agnefjäll said India is a particularly “huge undertaking” for IKEA, with the company staying focused on opening in the world’s second-most-populous country before considering expanding to other new markets.
IKEA has recently been grappling with the fallout from a huge recall of its chests and dressers in the U.S., Canada and China after regulators deemed them at risk of tipping over. Mr. Agnefjäll said IKEA is redesigning its dressers for the U.S. market—where they don’t meet local safety standards—and is considering its stance regarding the other markets, but that the company believes its products are safe so long as they are anchored to the wall with the fixtures IKEA provides.
The closely held company publishes only sales figures in September. It will publish its full accounts in December.
Write to Saabira Chaudhuri at [email protected]
Comments are closed