Growth over the past year reveals the early success of IKEA’s ambitious transformation programme; as the group presses ahead with its future-proofing, investing to accommodate ever-evolving consumer behaviour. Further, by moving sustainability to the centre of its business model, IKEA is stealing a march on competitors in an increasingly important area; one in which it is yet to truly reap the rewards in.”

For more see Furniture Retailing – UK, July 2019, Living and Dining Room Furniture – UK, October 2019 and Beds and Bedroom Furniture – UK, September 2018

What we’ve seen

  • In November 2018, IKEA launched its global transformation plan, bringing a greater focus on affordability, convenience and being people and planet positive, to create a new IKEA by 2021.

  • IKEA’s latest accounts reported a 7.9% growth in sales to £2.12 billion in FY 2019; this was up on the 5.9% growth registered in FY 2018.

  • The retailer also reported that it grew its market share to 9% in FY2019, up on 8.2% in the year before.

  • IKEA reported a 27% increase in online sales in FY2019, as it ramps up investment in the digital experience, with a particular focus on mobile.

  • 32% of consumers that bought furniture in the past year, made a purchase from IKEA (see Furniture Retailing – UK, July 2019).

IKEA looks to lead the way in multi-channel in response to changing consumer needs

Central to this transformation has been the acceleration of IKEA’s multichannel offering. Given the growing role of online, and the ever-enduring appeal of the store, the group remains committed to both channels.

Noting the importance of physical stores in the purchasing journey, IKEA opened two new stores in 2019: its 22nd big-box store in Greenwich in February, and its second smaller-format planning studio store in Bromley in March. The latter of these, its inner-city planning studio, showcases how the group are evolving their store proposition to match changing consumer demand. Amid growing urbanisation and reduced car ownership, IKEA are trying to provide access to consumers wherever and whenever they choose.

However, perhaps even more significant than this continued commitment to physical expansion, is its’ progress online. Following its somewhat delayed start, IKEA has ramped up investment in its digital capabilities; with a particular focus on mobile. The group wants customers to be able to search, find and buy online within five minutes.

With its new transformation programme, the group has championed the integrating of these channels, streamlining its in-store and online offerings to improve how customers access products online while helping customers to make the most of their in-store visits.

Figure 1: How they buy furniture, May 2018 and May 2019
[graphic: image 1]
Source: Lightspeed/Mintel

A transformation with sustainability at its heart

Beyond the integration of its shopping experience, another tenet of IKEA’s transformation has been moving sustainability to the forefront of its business model. In fact, the group remains committed to developing a fully circular business, moving from its current linear model to eventually give back more than they take by 2030.

IKEA has made significant progress in this over the past year alone. Firstly, the new Greenwich store was the group’s greenest to date, serving the new archetype for environmental standards: in sustainable technologies, renewable materials and energy and the integration of green space. Moreover, the store also serves as a hub of learning, educating shoppers how to live more sustainably, prolong the life of products, grow food, upcycle and make their homes sustainable.

In the wider business, the group invested close to €2.5 billion in onsite and offsite wind and solar power, enabling the business to generate more renewable energy than it consumes across all operations in 30 countries; thereby exceeding their 2020 target date. In addressing waste, 98% of packaging for IKEA products is now renewable, recyclable or recycled; with plans to remove all single-use plastic by 2020.

Beyond this, in April 2019, IKEA announced plans to roll out its furniture rental service globally in all 30 of its markets by 2020. Targeted initially in the students and office sphere, these services should boost sustainability efforts by extending product life and creating a more circular business model in furniture.

…which positions it well with shifting consumer sentiment

Amid mounting awareness and growing exposure, the call for sustainability is now greater than ever before. Groups such as Extinction Rebellion and figureheads like Greta Thunberg have thrust this environmental concern into the spotlight over the past year.

Mintel’s Moral Brands Trend highlights how consumers are looking to brands to be moral and ethical on their behalf. As a resource heavy industry, the focus of this in furniture falls largely on sustainability; as opposed to socially conscious ethical concerns. Mintel found that 24% of consumers, and 34% of 16 to 34 year olds, worry about the environmental impact of the furniture they buy (see Furniture Retailing – UK, July 2018).

Moreover, the demand for sustainability is growing. Beyond its prevalence in younger demographics, ethical considerations are growing increasingly prioritised across home retail on the whole. As shown in British Lifestyles: A New Understanding of Corporate Ethics – UK, April 2019, although the furniture market is toward the lower end of the spectrum, it is at the forefront of growth across retail sectors.

Accordingly, IKEA’s trailblazing in sustainability positions it well moving forwards, given changing consumer sentiment. By taking the initiative, IKEA can steal a march on competitors in an area which is set to become a major point of differentiation in the coming decade.

Figure 2: Ethical consideration taken into account, by retail sector, May 2015 vs January 2019
Base: 2,000 internet users aged 16+
[graphic: image 2]
Selected retail sectors
Source: Lightspeed/Mintel

What it means

  • IKEA has made a promising start in its transformation programme, as it looks to future-proof by progressing its’ store proposition, investing in online and integrating its multi-channel offering to cater to evolving consumer needs.

  • Growth during this upheaval is particularly promising given the climate of ongoing political uncertainty, which has seen others in the sector struggle over the past year. Accordingly, IKEA is well-positioned to consolidate and grow its market share further in 2020; a year in which the UK is set to formally leave the EU.

  • Moreover, in ramping up its focus on sustainability, with significant gains in the past year alone and its ambitious target of developing a fully circular business model by 2030; IKEA is moving ahead of the pack in an increasingly important area for consumers, leaving it well positioned in the years ahead.

Back to top