Ikea's new strategy indicative of changing role of stores

Swedish flat-pack furniture retailer Ikea will be opening its second order & collection smaller format store in the spring, in Aberdeen, following the unveiling of the first shop in this style in Norwich earlier this month.

The shops which allow customers to pick up online orders and peruse a tailored range of products are part of the company's plan to simplify the shopping process for customers and reach parts of the UK that, for years, have been hours away from an Ikea store.

Summer 2016 will also see the opening of a new Ikea store in Reading, which will be its first traditional store to be built in the UK for seven years, while new locations have also been secured for Sheffield, Greenwich and Exeter. While only a trial for the business, the order & collection points could also multiply over the coming years if the initial Norwich and Aberdeen concepts gain momentum.

Dusan Rnic, VP Oracle Retail UK & Ireland, argues that the new focus on stores from Ikea highlights wider industry trends, where retailers are starting to use their real estate in different ways to the past. With rapid growth in online sales over the last decade, many stores have had to shift their function and provide a space for more service-oriented retailing, as opposed to purely being a place for transactions.

"Ikea's latest move is yet another indication that the retail store is alive and well – our own research reveals that two-thirds of consumers prefer to visit an outlet as part of their shopping experience," he remarked.

"What has changed is the role physical stores play in the purchasing journey. Retailers must now consider the store's role as a service centre, as a collection point, as a showroom and as a place for customers to hang out. It has become an outlet through which shoppers engage with the brand and speak with experts to complement the online experience and their own research."

Ikea's store opening plans were detailed as part of its annual results announcement, which showed that UK sales totalled £1.57 billion for the 12 months to 31 August 2015 –an increase of 11.3% year on year.

The retailer's UK country retail manager, Gillian Drakeford, acknowledged that the company has experienced "fantastic growth" this year but said there were still "some steps to take in simplifying the shopping experience and meeting the expectations of UK consumers".

"In the next year and beyond, we will take some significant steps in our plan to make Ikea more accessible to many more people," she explained.

Store sales increased by 9% and visits grew by 4% year on year, while online sales jumped by 28.8% and website visits were up by 18.25%. The growing demand for Ikea online is prompting the retailer to launch a new website in the year ahead, with more details about this project to be revealed in due course.

Oracle's Rnic expects more digital innovation from Ikea in the coming months, too, with an opportunity to introduce various mobile services in its new smaller stores.

"Given the comparatively limited inventory that can be stocked in a high street shop, it's not hard to imagine Ikea adding a strong mobile element to its shopping experience so that customers can use their smartphones to order items from its full catalogue while in a store," he said.

"These shops would also serve as convenient pickup points for click & collect orders, meaning customers won't need to spend hours waiting at home for deliveries."

He added: "Delivering these kinds of services requires a transparent view of stock, inventory, and transactions across the organisation. Without this visibility, services such as click & collect are much more likely to suffer from delays and other complications, which will grate on customers' nerves and detract from their experience with a brand."

Drakeford said that Ikea's growth over the last year was "particularly pleasing" because it came from the organisation's existing business and without the opening of new shops.

"This puts us in a great position to continue to grow Ikea's physical presence in the UK in the future," she added.

Ikea UK & Ireland's CRM manager, Magnus Holst, is a confirmed speaker at RBTE 2016, which takes place at London's Olympia between 9-10 March 2016. Oracle will also be exhibiting at the event. Click here to register for your free RBTE visitor ticket   

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