IKEA to spend $3.2 bn on stores to build ecommerce business

IKEA retailer Ingka Group will be spending $3.2 billion through 2023 on new and existing retail stores as part of its plan to use the outlets to double up as ecommerce distribution centers, Reuters news report said.
IKEA and technology investment
Over the past three fiscal years, Ingka has invested around 2.1 billion euros in new and existing stores in its 32 markets. There are 466 IKEA stores in 63 markets.

IKEA online channels attracted more than 5 billion visitors in 2021, and online retail sales increased 73 percent, partly due to store closures. Though most stores have re-opened, this now accounts for 26 percent of total sales (excluding services).

IKEA expects to open 17 new markets in total and an average of 50 new locations per year (including tests) between FY19 and the end of FY23, Jon Abrahamsson Ring, CEO Inter IKEA Group, said in a note to 225,000 employees, partners and customers.

The latest spending will also focus on new traditional blue-box stores in Romania, China and India, and new city stores, as well as planning studios, in Canada, Denmark, Italy, India, the United States and other countries.

Tolga Oncu, retail manager at the group which owns most IKEA stores worldwide, told Reuters the money would be spent across all regions, though about a third is earmarked for London, a test-bed for new store formats and logistics set-ups.

“Most of it will be in our existing stores, since we talk about transforming, redesigning the purpose of the square metres,” Tolga Oncu said in an interview.

In the past few years, Ingka has adapted to the rise in online shopping by developing smaller stores, revamping its website and rolling out a new app as well as digital services such remote planning tools.

“We feel we have a catch-up to do on the back-end of our operation (and) we have realised that by including stores in our last mile and fulfilment design network we can create a win-win situation,” Tolga Oncu said.

Shipping online purchases from the warehouse sections of nearby out-of-town stores will mean faster and cheaper deliveries, with lower emissions, than by shipping from a few logistics centres.

Automating existing out-of-town stores’ warehouse sections will account for a lot of the investments, Tolga Oncu added.

The plan comes as many businesses turn cautious in the face of geopolitical tensions, high inflation and worsening consumer confidence.

During the pandemic, IKEA has seen record demand for its cut-price home furnishings as people spent more time at home.

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