New stores and online growth help IKEA fend off rivals

MADRID/STOCKHOLM (Reuters) - IKEA reported a 5 percent rise in annual sales on Wednesday as strong online growth and new stores in India and several other countries helped the world’s biggest furniture retailer cope with mounting competition.

The Swedish chain enjoyed decades of rapid growth as shoppers flocked to its out-of-town warehouses to pick up cheap furniture to assemble at home.

But the rise of online rivals such as Amazon and, alongside and signs of waning consumer enthusiasm for DIY home improvements, IKEA is now investing in e-commerce, city-centre showrooms and more home delivery and assembly services.

Barbara Martin Coppola, chief digital officer at IKEA Group, the owner of most IKEA stores, said tests underway ranged from connecting staff with customers via video to artificial intelligence tools to help people furnish their homes.

“It’s fantastic to see human interaction through technology when the consumer might need help or advice on where to place furniture,” she told Reuters in an interview at a new IKEA city-centre store in Madrid dedicated to living room furniture.

IKEA sold 38.8 billion euros ($44.6 billion) of goods and services in the 12 months through August, up 5 percent in local currencies, brand owner Inter IKEA said. The growth rate was roughly the same as the year before.

IKEA, whose stores are owned by 11 franchisees, opened 19 new outlets, taking the total to 422 in more than 50 markets. The largest franchisee is IKEA Group, with 367 stores.

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Inter IKEA CEO Torbjorn Loof told Reuters online sales at the brand jumped 31 percent to account for 5 percent of total turnover, in line with the year before. On a comparable store basis, retail sales were up just 1 percent in local currencies.

“We see that we have flattened out a bit on sales in existing stores, while we have strong growth through expansion and online,” Loof said.

IKEA, which makes most of its sales in Europe, opened its first store in India this year and announced plans to enter Latin America, starting with Chile in 2020 followed by Colombia and Peru.

It said on Wednesday it was also looking at entering Mexico, Estonia, Ukraine, Puerto Rico, Oman, Luxembourg, Macau and the Philippines in the coming years.

IKEA Group separately reported local-currency sales growth of 5 percent to 34.8 billion euros. Its CEO, Jesper Brodin, told Reuters that online sales jumped nearly 50 percent to account for 8 percent of total turnover.

IKEA has started building city-centre full-range showrooms, such as one in Paris planned to open in 2019. It is also trying other formats, such as the one in Madrid and a kitchen showroom where customers can also get planning advice in Stockholm.

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IKEA opens a similar studio in the center of London on Thursday dedicated to the planning bigger kitchen and bedroom storage projects in its push to step up its service offering.

Inter IKEA’s Loof said many self-service areas in out-of-town stores will transform into distribution centres as customers increasingly shop online and want home delivery.

“We will in the coming years move away from the traditional set-up that customers are used to, where most goods are in the self-serve furniture area and customers do much of the job, toward IKEA doing more of that job,” Loof said.

(This version of the story corrects title in fourth paragraph)

Reporting by Anna Ringstrom and Sonya Dowsett; Editing by Susan Fenton and Mark Potter