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Ikea builds up its online sales systems

December 10, 2015 05:52 PM
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(Bloomberg)—Ikea Group, the Swedish furniture chain, is ramping up its e-commerce business and sees its website delivering 10 cents of every euro in revenue by 2020.

Online sales exceeded 1 billion euros for the first time in the year ended in August, accounting for about 3% of total sales, CEO Peter Agnefjaell said in an interview Thursday. He expects that number to rise to 10% of sales by 2020, by which time the retailer will have expanded web sales to all its markets.

Ikea’s business model is less suited to online selling than for many retailers, as it has mostly relied on shoppers driving to its out-of-town outlets, collecting purchases themselves from warehouses, and spending time transforming flat-packs into bookshelves and beds. But the company is investing in new online systems, including one that will smooth the flow of orders, which should help it reach a target of 50 billion euros ($55 billion) in sales by 2020.

“Already today we have 1.9 billion visitors to ikea.com so it’s not like you just connect two cords and then it works,” the CEO said. “It’s an enormous investment in systems and distribution networks that should fall in place before we can introduce it on more markets.” The company declined to disclose the size of that investment.

Ireland testing

Ikea, No. 67 in the Internet Retailer 2015 Europe 500, is testing its new web systems in Ireland and hopes to start online sales in additional markets sometime in 2016 or 2017, Agnefjaell said. The company currently has online sales in 13 of its 28 retail countries. The growth of e-commerce has outstripped that at physical stores, according to Forrester Research.

While e-commerce should play a bigger role, the company also expects new stores and an improved product offering to help total sales grow between 8%-10% in coming years, the CEO said. Its business model tempts customers to pick up items such as Jubla unscented candles and Fantastisk paper napkins as they navigate through the aisles of maze-like stores.

“E-commerce will become a bigger part of our growth agenda,” he said. “We also expect that we can get more customers to our existing stores and combine that with better products.”

 

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