Can IKEA disrupt the furniture industry again?

Ikea’s cheap products and knack for letting shoppers walk away with bags of decor they didn’t know they needed have made it the world’s largest furniture company, with annual sales of 48 billion euros ($53 billion) last year ). The company, which is privately held through a dizzying network of foundations, controls about 9% of the fragmented global furniture market. To keep growing, it has been investing in e-commerce offerings and adding new store formats. Its latest experiment in second-hand furniture could help it become bigger and greener.

Over the past few years, IKEA has been working to make shopping more convenient, especially for customers without cars. Jesper Brodin, owner of INGKA, said that while many shoppers may enjoy wandering through its large stores, they don’t have the time to buy two folding chairs. INGKA owns most of IKEA’s stores (although not its intellectual property). With nearly all IKEA stores closed since the covid-19 pandemic, the company was initially slow to adopt online sales, which have been a priority for the company. They now account for 23% of the total.

IKEA has also been moving its stores closer to customers. It now features centrally located “planning centers” where customers can assemble their ideal kitchen, bedroom or bathroom. In many cities, small shops have also emerged in busy shopping districts. In July, IKEA invested in a tower under construction on Fifth Avenue in Manhattan. Avenue; a new store will open on Oxford Street in central London in the spring. The company has also been acquiring malls with the intention of adding IKEA as an anchor tenant. In November, INGKA acquired Churchill Square, a major shopping center in south Brighton. England, where it will open a store on a site once occupied by Debenhams, a failed department store.

Both developments are new for IKEA, but not for the industry as a whole. Even more novel, the company recently announced the launch of a platform to sell used Ikea furniture online, starting with a pilot in Oslo and Madrid that will run until December before rolling out globally next year. Ikea customers can already sell furniture back to the company in Ikea stores, with more than 200,000 customers using the service last year, double the number in 2022. The company’s second-hand platform will allow people to resell their old furniture to others. Direct to new buyers. IKEA will provide a suggested price, generic photos and product details (including important assembly instructions); sellers can then add their own images and choose a price. Buyers collect furniture.

Brodin said IKEA products already account for about a third of second-hand furniture sales in volume terms. Although the platform will be free to use, at least initially, it will provide IKEA with a way to encourage sellers to return to its stores. If they choose to use an IKEA coupon as payment method, they will receive a bonus of 15% of the sales price.

it has legs

In addition to boosting sales, the platform should also help IKEA achieve another goal: becoming more environmentally friendly. Mr. Brodin believes sustainability and profitability can go hand in hand. Since 2016, the company’s sales have expanded by a third, but the carbon emissions of its operations have been reduced by half and the carbon emissions of its supply chain have been reduced by a fifth. Currently, four-fifths of the energy consumed in its stores and factories comes from renewable sources. Germany is its largest market outside its home country of Sweden, where the company operates 23 solar farms and five wind farms (selling excess power to the grid). By making it easier for people to sell their old furniture, there will be fewer billy bookcases in the bin and more flat-pack furniture in the living room.

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