Ikea is a strong household name in the furniture industry. But online it’s a different story. It seems the Swedish company has missed the ecommerce boat. For years it ignored online retail, while focusing solely on sales happening in-store. But recently Ikea has been leaning more towards the online channel, as profit is slowing. Can it still succeed online?
Ikea reported this week flat profits for its 2014 fiscal year. The Ikea Group net income amounted to 3.3 billion euros, which corresponds with an increase of 0.4% from the previous year. This growth rate is slower than the 3 percent growth the retailer achieved last year and far slower than its 8 percent growth in 2012. Sales increased by 5.9 percent to 29.3 billion euros. But as the New York Times states, this rise was offset by the costs of higher employee wages, new employee programs and price reductions.
Ikea’s playing catch-up to Wayfair, Home24
Executives from Ikea acknowledged on Wednesday the company missed the memo to shift to an online mode and now finds itself playing catch-up to more web-savvy rivals, such as Wayfair, Overstock.com and Home24. “We weren’t one of the early adapters. But we’ve matured in our thinking about it”, Peter Agnefjall, Ikea’s chief executive, told the New York Times. “We realized this is not a trend, it’s a megashift.”
The online furniture industry is now worth about 9 billion euros and it’s expected to grow to more than 12.5 billion euros by 2019. It seems obvious that Ikea should have been online years ago. In fact, Ikea opened its first online store in the UK in December 2007, a little more than seven years ago.
But as Ikea was beforehand focusing more on its stores, consumer behavior changed. Consumers did not only went online to research or compare prices, they also wanted to shop via the Internet. They wanted to pay extra to get their furniture delivered at home.
Online furniture retailers in Europe
Meanwhile, American players like Pottery Barn, West Elm, Wayfair and Overstock.com, FabFurnish (India) and European furniture retailers such as Home24 (Germany), XXXLutz (Austria) and Hem all got their fair share of the online furniture market.
Ikea is active online, but not fully. In about half of the 27 countries where it operates it has an online store running. And not all products can be bought via its website; in the US for example only 70% of Ikea’s 9,500 products are available online.
According to Agnefjall Ikea now has a better apreciation for how ecommerce can even help drive sales at Ikea’s brick-and-mortar locations. “What’s happening is that people research on their mobile devices, come to the Ikea store, sit on the sofa, then place their order on the device. Technology is a driver that we just didn’t see a couple of years ago.”