In a few week’s time IKEA, the Swedish furniture giant, will open some of it’s first non-warehouse stores. One of these will be at my local shopping mall, Westfield Stratford. This is quite a significant change for a brand that has always relied on being able to touch and feel the products you are buying and has some of the highest rates of impulse purchasing in the retail industry.
Yesterday I had to brave a trip to IKEA to buy some new curtains. As the new local store is not yet open it was a 20 minute taxi ride to my nearest warehouse store. As I was making this journey I realised the potential for this new IKEA concept but also the potential issues to be faced in making it as profitable as the existing model.
I emphasise in my story that I had to take a taxi to IKEA, like many London dwellers of my age I do not own a car, both due to the cost of my ever growing rent and a total lack of space in which to park it. For an IKEA shopping trip this means I am limited to what I can carry home or perhaps what I can fit in the boot of my begrudging Uber driver’s car. The day’s of putting down the back seat and filling the car to the brim are long gone. The alternative is getting IKEA to deliver, at a pretty substantial cost (consider that Argos deliver furniture for £3.95) and which would also mean a day off work to receive it. This all plays to IKEA’s new model of local stores within walking distance of major housing centres where people can stroll home with their new wardrobe.
This however, is potentially where I see issue number one. In an IKEA warehouse you can park your car at the bottom of the lift after you checkout and you can load your car straight from the trolley. Are people really going to negotiate the stairs and pavements on their way home to bring home their new furniture?
Anyone who has ever been shopping in IKEA knows that it is almost impossible to leave with just what you came in for. The store makes you walk past room after room showing off how you can utilise product in your home and then makes you walk past every plate, glass, storage device and toilet brush in the marketplace before you can even checkout. On my curtain quest in took all the willpower I had not to buy a set of wall paintings, three hurricane lanterns, a floor lamp and a set of tumblers. While I do not have the exact figures I am sure this must significantly improve the average basket values and the items per transaction of IKEA customers. The question is without this product interaction in Click and Collect will the economics of the model add up?
In an IKEA store you can see, touch and most importantly measure every product before you commit to purchase. People are notoriously bad at measuring things in their own home but when you see it most people can go ‘That is too big and won’t work in my room’. One of my biggest concerns over the new store model is that product will need to be ordered blind and then delivered for collection. This ad-hoc distribution will be more expensive for IKEA as it cannot rely on full trucks to reduce distribution costs. Additionally blind purchasing will inevitably lead to more errors and therefore more returns, returns are one of the single biggest impacts to the bottom line for retailers. With a range as vast as IKEA it is also questionable whether the local store will be able to resell the product or it will need to be returned to central distribution at yet more cost. Combining increased distribution and increased returns costs certainly looks to the outside observer to make this new model economically challenging.
This is certainly a bold move for IKEA who have been relatively reluctant to date to even engage wholesale in online sales. It is unclear at the moment whether the new stores will require you to go in to order or you will be able to order all products online ahead of a visit. The first model would definitely be less appealing to me, ordering on my phone and collecting on the way home from work has become the norm in my retail interactions.
I have a few more IKEA purchases I am holding off from at the moment but as soon as the new store is open I will be giving it a try and will update you on my thoughts on the new experience as a customer. Bold moves in retail are needed to keep things moving and to stay ahead of the competition, my only question is whether a more robust online shop combined with reasonable cost same day delivery might have been a better option for IKEA, only time will tell.