Ikea said Tuesday it has opened more click-and-collect locations in fiscal 2016 than traditional stores, a shift from its longstanding emphasis on huge warehouse-like locations. While Ikea opened 12 new stores in fiscal 2016, it opened 19 “Pick up and Order” centers in the same timeframe.
The world’s largest furniture retailer said the centrally-located click-and-collect centers span an average size of 20,000 square feet. Customers can pick up online orders and also purchase a limited number of products they hadn’t ordered. CEO Peter Agnefjall told Reuters he sees the locations as tests "to see which formats and locations work best."
Parent Ikea Group Tuesday reported a 30% increase in e-commerce sales during fiscal 2016, Reuters reports. Total sales were $37.6 billion (EUR 34.2 billion), and adjusted for currency impacts, total sales rose 7.9%, according to a company press release. Same-store sales grew 4.8%.
Ikea has been slow to warm to e-commerce, which could be a reflection of the particular inefficiencies and high costs of shipping heavy furniture. But e-commerce and omnichannel are no longer avenues to ignore, and the Swedish retailer is responding.
Ikea’s record sales report belies the fact that it also has a reputation for low-quality goods, which relegates its core customer to extremely price-sensitive college students and other budget shoppers. That has prompted some soul searching, and led Agnefjall to commit earlier this year to bolstering the quality of the retailer's furniture. "Customers expect us to do more,” he told Reuters in July. “And nowadays you can't really make products that are throwaway: When you buy a sofa table, it needs to be built to last.”
Right now, it isn’t. Even Ikea’s biggest fans will tell you that. “They have so much brand equity, but it’s not very high quality,” Philip Ryan, associate partner at consulting firm Vivaldi, told Retail Dive earlier this year. “It’s great design, very functional. It’s almost akin to Zara [fast-fashion] clothing.” In some cases poor quality also means unsafe. Earlier this year, Ikea recalled 29 million chests and dressers sold in North America and China — products blamed in multiple deaths and injuries of young children.
Meanwhile, the retailer’s e-commerce results this year are quite a departure from past years. Its previous strategy has slowed the retailer’s overall growth, and after reporting overall online sales growth of just 0.4% in 2014, Ikea pledged to increase e-commerce from about €1 billion per year to at least €5 billion in the next five years to meet its targeted sustained overall growth rate of 10% per year.
Last year Agnefjall spun the retailer's late entry into e-commerce as a good thing. "We could have been faster, I could agree to that," Agnefjäll told CNBC in October. "But by being late we can skip a step in the technology development, straight to mobile and tablet.” So far, that appears to have worked.