Ikea will invest 2.2 billion dollars in new American store models, collection points

LONDON, UNITED KINGDOM – 2019/09/22: IKEA sign seen outside the showroom in London. (Photo by Dinendra Haria/SOPA Images/LightRocket via Getty Images)

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Ikea will invest more than $2.2 billion over the next three years on its omnichannel growth strategy in the U.S., marking the Swedish home and furniture company’s biggest investment push since it opened in the U.S. nearly 40 years ago.

Omnichannel retail experiences, where online and in-store shopping experiences complement each other, have become increasingly popular in light of a pandemic-spurred online shopping boom.

Its roots predate the pandemic: in the US, the trend was boosted by Amazon’s purchase of Whole Foods in 2017, which integrated a number of technological advances into the personalized shopping experience. Soon, big-box retailers such as Walmart and Target followed suit.

Ikea, already known for the carefully curated showrooms and model apartments in its flagship stores, has already started to move towards such a strategy. In recent years, the company has routinely rolled out updates to its in-home augmented reality preview tools. And as a home and furniture company, there’s an added appeal to mixing store and online, as customers have to envision how the products will fit into their existing home.

The retailer’s $2.2 billion investment will be used for a range of initiatives, including the expansion of new store models and pick-up locations, and is aimed at improving accessibility while keeping products affordable, Javi Quiñones, managing director and head of sustainability at Ikea US, told CNBC.

“It’s also an indication of how important the US market is to Ikea,” Quiñones said. “We started here in the US almost 40 years ago and this is the biggest [investment] we ever did.”

A precise breakdown of how the multibillion-dollar investment stacks up against some of Ikea’s specific omnichannel efforts is not yet available, an Ikea spokesperson said.

As part of the investment, the company will open nine “Plan & Order points”, an extension of the company’s existing “planning studios”, where customers can get personal help with larger home projects, such as kitchen or bathroom renovations.

Plan & Order points will work just as the company’s planning studios have done so far: After consulting with Ikea’s in-studio planners, customers can order items to be shipped directly to their homes. No items are actually stocked for purchase in the planning studios.

The chain opened its first planning studio in New York’s Upper East Side in 2019, calling it its first “city center,” and has since opened several other storefronts, but it closed the New York store in January 2022, saying it was looking to relocate.

These alternative shopping options are meant to complement, not replace, Ikea’s flagship stores, Quiñones said.

The company is “absolutely exploring every option” when it comes to the ideal placement of these different store models, he added. The first Plan & Order location scheduled to open this year will be in Arlington, Virginia, with many more in the pipeline, according to Quiñones.

Down the road, some may open in places that already have an Ikea store nearby, while others may open in cities without any Ikea presence. “The whole intention here is to be closer to many more Americans,” Quiñones said.

As part of this effort, Ikea’s new investment will also see eight new stores added to its existing lineup of US stores. To date, there are 51 stores in the United States. Combined with the Plan & Order points, the addition of the eight stores will usher in 2,000 new jobs at the company, Ikea said.

Ikea also adds 900 new collection points to the list, so that customers can pick up ordered items from more convenient locations. Like omnichannel retail more broadly, ordering options have flourished at a number of retailers throughout the pandemic.

The majority of Ikea’s pickup locations will be linked to Ikea stores, and some stores will have multiple pickup locations, Quiñones said. In some cases, if there is no Ikea store near a pickup location, orders will be delivered from a distribution center instead, he added.

While Ikea is investing in expanding its pickup options, Quiñones emphasized that the company remains committed to its larger locations, saying that “the full Ikea experience” happens when customers walk into an Ikea store. “Pickup points will be there to make things more convenient for customers,” he said.

Ikea’s investment will also fund continued efforts to modernize existing stores, in part by improving energy efficiency, solar panel installations and electric vehicle fleets, Quiñones said.

This effort will be crucial to the company’s climate goals: By 2025, Ikea plans to get its home deliveries exclusively via electric cars, a key part of the larger plan to reduce greenhouse gas emissions.

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