IKEA Group plans to extend online retailing to all its markets within the next few years as the world’s largest furniture seller resumes expansion after a 12- month pause.
IKEA hasn’t added to the 13 countries in which it offers Web shopping over the last year and still harbors an ambition to reach all 27 in which it has stores, the company said today after reporting a 3 percent gain in full-year sales.
The focus over the past year has been on improving online offerings in existing markets, Chief Executive Officer Peter Agnefjaell said in a telephone interview. Critics have argued that the retailer’s approach to online expansion has been too conservative since it opened www.ikea.com in 1997.
“IKEA was slow to embrace the online channel, but has been investing heavily over the past couple of years,” said Maureen Hinton, an analyst at researcher Conlumino in London. “Integrating an online offer, meeting the expectations of the modern online shopper, keeping prices low and making a profit is not easy for big-ticket items, so it is understandable that it is honing its service before rolling it out to all markets.”
IKEA ’s business model is less suited to online selling than for many retailers, as it has mostly relied on shoppers driving to its out-of-town outlets, collecting purchases themselves from warehouses, and spending time figuring out how to transform flat-packs into furniture.
“IKEA is facing a dilemma,” Cruz del Barrio, head of home and garden research at Euromonitor International, said in an email. “They need to find a formula where Internet sales are an addition to the brick and mortar sales, not a replacement of them.”
The current model has allowed the retailer to keep prices low and tempt customers to pick up items such as Jubla candles and Fantastisk paper napkins as they navigate through the aisles of maze-like stores. IKEA is also cashing in on Swedish meatballs at in-store restaurants and on purchases of jars of lingonberry jam at Swedish food markets in outlets around the world.
“A key proportion of their sales come from cheap impulse products purchased in-store,” del Barrio said.
Attracting more Web visitors and having more products available for purchase at online shops helped IKEA’s sales increase to 28.7 billion euros ($37 billion) in the 12 months through August, the retailer said Tuesday in a statement. Its box-like stores had 716 million visitors during the year, while 1.5 billion people visited the retailer’s websites.
IKEA Group, which with 315 outlets owns the majority of the world’s IKEA stores, is seeking to double sales by 2020 by improving stores, opening new outlets, expanding products available online and introducing new collections more frequently.
The flat-pack furniture retailer’s same-store sales gained 3.6 percent in the year. Growth was fastest in China, while North America continued to perform well and Europe improved.
Euromonitor estimates that Inter IKEA Systems BV, the Ikea franchisor, increased its share of the global market for indoor living merchandise to 5.1 percent last year from 4.8 percent in 2009.