Ikea to spend €3bn on stores as part of e-commerce drive

Furniture retailer to modify out-of-town stores so they can also become distribution centres for online purchases

Ikea 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 as remote planning tools.

Ikea retailer Ingka is spending €3bn through 2023 on new and existing stores, much of it to modify its trademark out-of-town outlets so they can double up as e-commerce distribution centres.

Tolga Oncu, retail manager at the group which owns most Ikea stores worldwide, said 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," Mr 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 as 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," Mr Oncu said.

Faster and cheaper deliveries

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, he said.

"Instead of building central warehouse capacities for online buys, why don't we send it from our Ikea stores?"

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

The plan comes as many businesses turn cautious in the face of geopolitical tensions, high inflation and worsening consumer confidence. But Mr Oncu said for Ikea, which is funded by its owner foundations, the timing couldn't be better.

"I agree the outlook [for consumer spending overall] looks a bit gloomy. That means value for money and time, affordable solutions that are of good quality, function and design and sustainable will increase in demand," he said.

Record demand

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

Over the past three fiscal years, Ingka has invested about €2.1bn in new and existing stores in its 32 markets.

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 US and other countries. 

Meanwhile, Ikea has extended the period it will pay nearly 15,000 staff in Russia by three months, through August, and may continue to pay workers beyond that.

It had said in March it would temporarily close stores and pause sourcing in Russia, citing supply chain disruption and challenging trading conditions due to Russia's invasion of Ukraine. At that time, it said all affected staff would be paid, in roubles, at least through May. 

• Reuters