Ikea plans to maintain or raise its already high investment levels in the future while adapting to the rapidly changing shopping habits, its new chief financial officer said.
The world’s biggest furniture retailer has been known for its out-of-town warehouse stores. Ikea is starting to add city-center showroom formats with the goal to attract new generations of shoppers.
In conjunction with this, the privately-held retailer is also further developing its online store to fight more competitively with e-commerce giants, such as Amazon.com Inc, which in November launched two furniture brands of its own. Among other rivals are Flipkart in India and Otto in Germany, as well as Home24.
“Of course you can see online players such as Amazon and Flipkart growing,” said Juvencio Maeztu in a statement. Maeztu took the helm as Ikea’s CFO 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,” he added.
Maeztu partly indicated that the business will maintain heavy investment, while exerting pressure on profits as it did in the financial year through August last year.
Ikea invested 3.1 billion euros in stores, distribution and consumer service networks, shopping centers, renewable energy, and forestry during its 2016/2017 financial year.
Ikea’s new CFO stated that total annual investments in traditional store expansion, new city-center formats, digital services, e-commerce warehouses, and distribution would be as high or higher in fiscal 2018-2020.
“We will invest in being more accessible. We will keep investing in the same or even more over the next three years,” said Maeztu.
Ikea also stated that one of their advantages was their strategy of surveying households. They try to know more about consumers’ everyday frustrations and ambitions, usually by conducting home visits.
Maeztu also hopes to leverage his recent experience as Ikea’s manager for India. In 2012, the Swedish retailer managed to be the first single-brand retailer to be approved to open stores in the said country. It is currently planning to launch its first Indian store in Hyderabad early this coming summer.
When he was in India, Maeztu’s efforts to get closer to customers included around 800 visits to family homes. He did them either by himself or with the member of his team.
“This is something we will do even more,” he said.
Ingvar Kamprad, the founder of Ikea, died in January at the age of 91. His business operates through a franchise system, with Inter Ikea as the brand owner and franchisor. Ikea has 393 stores in 29 markets out of a total of 413 stores in 49 markets.
Last September, the retailer achieved its first ever acquisition outside the group of companies that make up Ikea. It bought TaskRabbit, an American online marketplace for odd jobs, like furniture assembly. It has also hinted on more acquisitions or partnerships in the works.
For Maeztu, the strategy shift will give the company a new way to maintain costs at a good level, which is some sort of a necessity as the market changes.
“TaskRabbit is an example of partnership in order to really keep prices down at the same time as we are offering the best of Ikea,” he said. “We are exploring other partnerships, but we don’t have anything specific (to communicate) now.”
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