Ikea is exploring its entry into new business areas beyond the furniture and decoration sector, in which the last fiscal year, closed in August, had a turnover of 37.4 billion euros, 6.3% more than in 2020.
The group presented at the H22 City Expo, the design fair that is being held in the Swedish city of Helsingborg, three proposals for “temporary houses”, sustainable (made of wood) and integrated into nature. “Here our idea would be to take a step further in what would be a camping house, taking it to a higher level,” said Marcus Engman, creative director of the group.
The firm already builds modular homes, which it calls BoKlok, but only in Sweden. There he builds even complexes for seniors, in a joint initiative with the construction company Skanska and Silviahemmet, a foundation for dementia promoted by the Queen of Sweden. “We are not thinking of taking the project to other countries because there are many local regulations on construction, on plumbing, electricity… everything is very local.” For this reason, “the idea, at least for now, is not that Ikea turns it into an industry and we make Ikea houses all over the world.”
The group is already building houses in Sweden, but for now it rules out doing so in other countries
The group is also looking for opportunities in the automotive sector in the wake of the revolution that will be the self-driving car. Simon Caspersen, CEO of Space 10, the start-up that concentrates the group’s most innovative projects, explains that “a car without a steering wheel or pedals will ultimately be a small living space. And who knows more about designing small spaces than Ikea? The group, Caspersen pointed out, would not enter the industry directly, but instead seeks to establish alliances with large manufacturers to handle interior design.
Ikea explores other avenues of diversification, but the most advanced is restaurants. The group already manages the sixth largest restaurant chain in the world and is considering establishing them as a separate business, outside its stores, taking advantage of the greater interest of consumers in healthy food: the firm is collaborating with food companies with the aim of having 50% of its menu of vegetable origin in three years. Now, in addition, a third of those who visit their stores do so just to eat.
Ikea has seen demand for its products increase due to the pandemic, while it has had supply difficulties due to global problems caused by the lockdowns in China, the blockade of the Suez Canal and now the war in Ukraine.
Jesper Brodin, CEO of the Ingka Group, the Swedish group’s parent company, explained that to deal with this situation “we are studying how to bring supply and production closer to where we sell the products”. The group, he explained, has already managed to manufacture in Europe 70% of the products it sells in the region, and that percentage could even increase “over time.”
The Swedish firm already announced a few months ago the relocation of production to Turkey, but it is also looking to increase its Spanish suppliers, spokesmen for the group said.
The group already manufactures 70% of the products it sells in the region in Europe
Spain was last year one of the three markets in which the group grew most strongly, along with the United States and Russia. Brodin explained that “our commitment to Spain is long-term, and the expansion plan that we have been developing since 2021 will be completed in 2023. Madrid and Barcelona are strategic cities for IKEA globally. During the last three years our objective has been to invest 150 million euros and create 750 jobs and we are on the right track”.
The firm has also used Spain to test new business concepts. “Madrid is the market in which we first tried smaller stores in city centers, a format that has been successful and that we have taken to other markets,” he added. In Catalonia, on Diagonal de Barcelona and Sant Pere de Ribes, the company is testing another format, the Ikea Planning Studio planning and design centres.
“We are always exploring how we can renew ourselves. We have a clear goal, which is to become more accessible, affordable and sustainable and, as part of that, we are testing many formats and ways to meet customers, wherever, whenever and however they want so that they can enjoy the best Ikea experience” .
In this framework, Brodin explained, the firm fits its digitization that has grown exponentially since the start of the pandemic: last year its online sales grew by 73% and today, despite the fact that the stores are open again, they already account for about 30 % of your global turnover. “Few customers use a single channel. As an example, we know that more than 80% start their purchase online and then continue with the store, and then maybe return to the web to place the order”. Therefore, he explains, the group’s objective is not to reach a certain percentage of internet sales. “For us it’s not about one or the other, it’s about offering both channels and giving customers a seamless experience.”
Ikea announced in January an average price increase of 9%, due to the rise in the cost of raw materials, but costs have increased even more as a result of the invasion of Ukraine, which could lead the group to apply additional increases . “Affordability is essential for Ikea and our intention remains to keep our prices as low as possible,” said Brodin. Even if we have absorbed many of those increases by reducing our margins, Ikea, like many multinationals, is not immune to the macroeconomic situation, ”he acknowledged.