Long a laggard in online sales, the Swedish retailer Ikea, which is privately held, has finally recognized the need for a more robust e-commerce presence.
After weak earnings growth in its last fiscal year, the world's largest furniture retailer wants to make 90 percent of its products available online, up from its current 70 percent. Ikea has 315 stores in 27 countries, and 40 in the United States, and has made its annual catalog and its mammoth stores the focus of its marketing rather than the Web.
"We weren't one of the early adapters, but we've matured in our thinking about it," Peter Agnefjall, Ikea's CEO told The New York Times. "We realized this is not a trend, it's a megashift."
While sales grew 5.9 percent in 2014 over the prior year overall, and U.S. same-store sales growth was up 4.2 percent, e-commerce sales rose 35 percent. Ikea is investing in its shipment services, and made 40 percent more home deliveries in the U.S. last year, according to the retailer.
Meanwhile net profit rose 0.4 percent, down from 3 percent in 2013 and 8 percent in 2012. The results were affected by higher wage costs, price reductions and new employee programs, according to the NYT.
Part of the e-commerce growth came from consumers who research products "on their mobile devices, come to the Ikea store, sit on the sofa, then place their order on the device," Agnefjall said. He noted that Ikea now has a better understanding of how the Web can drive brick-and-mortar sales.
Among Ikea's online competitors are the Williams-Sonoma brands Pottery Barn and West Elm, as well as Wayfair and Overstock.com. These companies now have a combined 42 percent of all online furniture sales, IBISWorld research shows. Home Depot and Lowe's have also made online inroads in the category. In November, Williams-Sonoma said that 51 percent of its revenue was now coming from online sales.
Online furniture sales are predicted to reach over $14.2 billion by 2019, up from $10 billion in 2014, according to IBISWorld.
Not only did it take Ikea until now to recognize the degree to which shoppers are researching products and comparing prices online, but it was also slow to perceive that time-pressed consumers were willing to pay more to have their furniture delivered or assembled at home for them. It had continued to encourage shoppers to assemble the furniture themselves.
One observer said Ikea had squandered big opportunities in e-commerce and may find it difficult to catch up. "They should have been on the Internet years ago. They could have built up a significant business by now," said Peter Tourtellot, managing director of Anderson Bauman Tourtellot. "It was shortsightedness. They got wrapped up in their own success."
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