IKEA’s New CFO’s Strategy To Compete With Amazon

To evolve with changing shopping habits, IKEA has announced plans to keep up with or increase its heavy level of investment in eCommerce and brick-and-mortar efforts. The home furnishings retailer plans to grow its online business to compete with Amazon and add versions of its showrooms geared towards city centers, Reuters reported.

Amazon has two new furniture brands with which the company must contend. In addition, India’s Flipkart and Germany’s Otto and Home24 also compete with IKEA.

“Of course, you can see online players such as Amazon and Flipkart growing,” said Juvencio Maeztu, IKEA’s CFO, who took over the job last month. “What is more relevant than ever is to be as close as possible to the consumer — it has much more power than before.”

In its 2016 to 2017 financial year, IKEA Group, which owns most of the IKEA stores around the world, invested 3.1 billion euros in its business. Maeztu said the company would invest the same amount between 2018 and 2020, focusing on areas like digital services and eCommerce warehouses.

IKEA wants the online share of its sales to grow from almost nothing to 20 percent by 2020, and the retailer rolled out a new eCommerce platform to push toward that goal in 2014, Retail Week had reported. While IKEA has run some interesting promotional experiments on its site in the past, its actual eCommerce sales are currently negligible.

“Today our whole business is based on shoppers coming to the store, picking things up and delivering them yourself,” according to Lars Gunnarsson, IT demand manager at IKEA, in comments at the 2014 JDA FocusConnect conference in Barcelona. “eCommerce is our single biggest project.”

It’s also the biggest challenge for the Swedish furniture giant. Conventional wisdom says online retail is all about customer-friendly elements like targeted discounts and free shipping and returns — all of which work fine for shoes and apparel, but aren’t practical for flat-pack furniture sold with very low margins. To keep costs down, the chain plans to allow shoppers to pick up items directly from warehouses.