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New stores, online growth help IKEA fend off rivals; sales rise 5%

Reuters/ 10 Oct 18 | 05:55 PM

Photo: Shutterstock

IKEA reported a 5 per cent rise in annual sales on Wednesday as strong online growth and new stores in countries such as India and Latvia helped the world's biggest furniture retailer to cope with mounting competition.

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The Swedish chain enjoyed decades of rapid growth as shoppers flocked to its out-of-town warehouses to pick up cheap furniture to assemble at home.

But with the rise of online rivals such as Amazon and made.com, and signs consumers' enthusiasm for DIY home improvements is waning, IKEA is now investing in e-commerce, city-centre showrooms and services such as furniture assembly.

Barbara Martin Coppola, chief technology officer at IKEA Group, the owner of most IKEA stores, said tests underway ranged from connecting staff with customers via video to artificial intelligence tools to help people furnish their homes.

"It's fantastic to see human interaction through technology when the consumer might need help or advice on where to place furniture," she told Reuters in an interview at a new IKEA city-centre store in Madrid dedicated to living room furniture.

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IKEA sold 38.8 billion euros ($44.6 billion) of goods and services in the 12 months through August, up 5 per cent in local currencies, brand owner Inter IKEA said. The growth rate was roughly the same as the year before.

IKEA, whose stores are owned by 11 franchisees, opened 19 new outlets, taking the total to 422 in more than 50 markets. The largest franchisee is IKEA Group, with 367 stores.

Inter IKEA CEO Torbjorn Loof told Reuters online sales at the brand jumped 31 per cent to account for 5 per cent of total turnover, in line with the year before. On a comparable store basis, retail sales were up just 1 per cent in local currencies.

"We see that we have flattened out a bit on sales in existing stores, while we have strong growth through expansion and online," Loof said.

ALSO READ: IKEA to spend Rs 30 bn for 3 fulfilment centres in Mumbai, Bengaluru, Delhi

IKEA, which makes most of its sales in Europe, opened its first store in India this year and announced plans to enter Latin America, starting with Chile in 2020 followed by Colombia and Peru.

It said on Wednesday it was also looking at entering Mexico, Estonia, Ukraine, Puerto Rico, Oman, Luxembourg, Macau and the Philippines in the coming years.

IKEA Group separately reported local-currency sales growth of 5 per cent to 34.8 billion euros. Its CEO, Jesper Brodin, told Reuters online sales jumped nearly 50 per cent to account for 8 per cent of total turnover.

($1 = 0.8709 euros)

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