IKEA makes push for growth

Staff Writer
Columbus CEO

NEW YORK (AP) — IKEA, whose stadium-sized furniture stores draw shoppers from miles around, is making an online push.

The CEO of IKEA Group, the world's largest furniture chain, is pushing for sales growth, while making its ready-to-assemble furniture more accessible to shoppers increasingly buying online.

Peter Agnefjail, IKEA's president and CEO, told The Associated Press in a phone interview Friday that he remains focused on reaching sales of 50 billion euros ($63.7 billion) by 2020, a goal set a couple years ago. And he says he's not unnerved by the recent investor fears about another recession in Europe.

He plans to reach that goal by opening more stores, while making the locations more inviting and expanding its online business around the globe.

"We are optimistic about what we see," said Agnefjail, an 18-year IKEA veteran who took over the reins from Mikael Ohlsson in September 2013. "Unemployment is stabilizing in many markets."

But Agnefjail acknowledged the Swedish retailer, which operates 315 massive stores around the globe, has to go where shoppers are heading.

"Customers still would like to sit in the sofa and feel how comfortable it is," he said. But he said they also mix up online and offline shopping. "What we do see is that customers are more walking across channels in a way that is very seamless."

The focus marks another chapter in the history of IKEA, founded by Ingvar Kamprad in 1943 as a mail-order company whose stores now drew 716 million visitors in its last fiscal year.

IKEA is starting to see a recovery in many of its markets, particularly its European business, which accounts for about 70 percent of total sales and has been hampered by an economic slowdown there. But IKEA also needs to offer more convenience to shoppers as it faces increasing competition here and abroad.

Abroad, there are players like Home24, a German-based online furniture startup looking to expand. In the U.S., IKEA faces fragmented competition from different types of chains from discounters like Wal-Mart and Target to chains like Crate and Barrel at the higher end.

"IKEA is still the low-priced go-to furniture place," said Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors. But he noted everyone is trying to take a bite out of IKEA's business.

Last month, IKEA announced 5.9 percent revenue growth in the year ended Aug. 31 to $28.7 billion euros. ($36.6) That's an increased pace from the 3.1 percent increase in the prior year.

IKEA also continues to focus on cutting prices on big-ticket items as it seeks to outfit more homes around the globe. Last year, it cut prices by 1 percent, in line with the long-term average of 1 to 2 percent. During the recession, it cut prices more than that. IKEA cuts prices by looking for new ways to cut costs. For example, shipping one sofa flat — squeezing five onto a pallet instead of three — has cut thousands of truck trips.

But IKEA is also working hard to cater to customers looking for convenience.

"The store layout needs to be customer friendly. And the website is underdeveloped, and there's a huge upside opportunity for them," said Craig Johnson, president of Customer Growth Partners, a retail consultancy in New Canaan, Connecticut.

Currently, IKEA sells online in only about half of the countries it operates. And now 90 percent of the 9,500 items offered in its stores are online, up from about half a few years ago, on a global basis. In the U.S., 70 percent of its store products are offered online.

IKEA is also looking to offer services for online shoppers that allow them to pick up the goods at stores. Currently, that service is only available in its stores in the United Kingdom. Agnefjail noted customer traffic to increased to 1.5 billion customers in its latest fiscal year, up from 1.3 billion in the prior year and 1.1 billion in the year before that.

Overall, "We are just at the beginning. We are still small," Agnefjail said.


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