IKEA plans full-range town-center showrooms, 'open-source' design

STOCKHOLM (Reuters) - IKEA plans to test “open-source” design and full-range town-center showrooms as part of the furniture retailer’s efforts to adapt to rapidly changing consumer shopping habits.

FILE PHOTO: A woman is seen in an Ikea shop in a mall in Rome, Italy, May 19, 2017. REUTERS/Max Rossi/File Photo

The budget furniture retailer’s strategy will still be based on its out-of-town warehouse stores, where shoppers pick up their purchases, but it also wants to become more accessible, physically and digitally.

It has launched trial store formats such as smaller city center stores, order and pickup-points and - the latest test format - a kitchen showroom in Stockholm’s financial district.

Torbjorn Loof, chief executive at franchiser Inter IKEA, said the group would try more things in different markets. “Our customers will see new initiatives, both physical and digital,” he told Reuters.

Loof was speaking after Inter IKEA said stores worldwide reported total sales of 38.3 billion euros ($44.9 billion) in the fiscal year through August, up from 36.4 billion a year earlier.

The web of companies that make up IKEA has focused ownership of retail operations, which also include shopping centers and food retail, on IKEA Group. Supply chain management and design has transferred to brand owner and franchiser Inter IKEA.

With IKEA Group focusing fully on retail, the hope is that it will be better placed to defend its market-leading position and maintain growth as competition and consumer expectations shift towards online shopping and home delivery.

Loof said IKEA was fine-tuning its city-center store concept, developing a format to display its entire range but in a smaller space with the help of new digital tools such as virtual reality.

The new stores would also not need parking lots or large inventories thanks to expanded home delivery services.

“This (format) will come within the next few years,” he said in the interview.

The group is also planning a digital platform next year that mimics the IT sector’s ‘open-source’ software development, Loof said. This will allow customers to take part in the development as well as testing of new products.

“We are launching ‘Co-Create IKEA’, a digital platform where customers will have the possibility to develop and test new products ... a bit like the open-source development within IT,” Loof said.

IKEA had 403 stores in 49 markets at the end of its fiscal year.

“In (fiscal) FY18, 22 new IKEA stores are planned, which includes new markets in India and Latvia, as well as continued roll out of new formats and expanded e-commerce activities,” Inter IKEA said in a statement.

It also said in the long term the group is looking at potential new markets and plans to enter South America within the next five years.

The IKEA stores are owned by 11 franchisees, of which IKEA Group is the biggest with 355 stores. IKEA Group is due to report annual sales on Tuesday.

In June, Loof said IKEA planned to test selling its products on websites other than its own from next year in another strategy shift to reach more customers.

Reporting by Anna Ringstrom; Editing by Mark Potter and Jane Merriman