IKEA eyes sales rebound thanks to surge in online shopping

By: Elina S.

IKEA sees sales returning to growth this year after the coronavirus crisis boosted shoppers’ interest in spending more on their homes, a trend the world’s biggest furniture retailer believes is here to stay.

IKEA is shifting focus from its traditional large out-of-town stores towards e-commerce and smaller inner-city formats as it adapts to the growth of online retailing and new shopping habits.

Jon Abrahamsson Ring, an IKEA veteran who became CEO of brand owner and franchisor Inter IKEA in March, said that, including test formats stores, some 50 new stores would open in the current year, compared to about 30 in 2019-20. Most of IKEA’s new stores are in inner cities.

Retail sales at  445 IKEA stores and online shrank 4 percent in the year through August, to 39.6 billion euros ($46.7 billion).

Abrahamsson Ring told Reuters retail sales at comparable stores shrank 10 percent against a 1 percent rise the year before. Adjusted for the temporary closures, however, comparable sales were unchanged.

He predicted a return to growth in the current year. “We feel very strongly that this interest in your home, how you live at home and create an even better home, is here to stay.”

He said demand for IKEA’s lowest-priced ranges had grown during the crisis to make up 60 percent of sales in May-August, versus 45 percent usually. “Low prices have become super relevant in this period with the uncertainty.”

E-commerce jumped 45 percent to account for 15 percent of total retail sales. Inter IKEA said online sales remained high even after stores, most of which closed temporarily for an average of four weeks early in the pandemic, re-opened.

Ingka Group, the main IKEA franchisee, said sales at its 378 stores shrank 4 percent, to 35.2 billion euros, with online sales soaring 60 percent to make up 18 percent of its total turnover.

Ingka’s CEO Jesper Brodin told Reuters that in recent weeks, the retailer’s sales were up 7-8 percent year-on-year.

“Corona has without doubt impacted the interest in life at home. But it’s to a degree that we hadn’t really expected,” he said.

He said early in the crisis demand was focused on primarily on office and cooking products but now demand was now up across the range.

“We don’t think the strength of the interest in life at home was a pent-up need. Had that been the case we’d have seen a slowdown many weeks ago.”