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Ikea Exec: Stores’ Expanded Fulfillment Role Key to Maintaining Lower Prices

Image courtesy Ikea

Ikea stores, long known as warehouse-sized selling spaces scented with the wafting aroma of Swedish meatballs, have been shrinking and changing functions in recent months — including taking a bigger role in last mile fulfillment. While this shift has helped the retailer reduce lead times for greater efficiency, it also created a challenge for store designers: allocating space for fulfillment functions “without compromising on the exploration and the way we make products come to life,” said Sara Del Fabbro, Deputy COO at Ikea parent company Ingka Group.

Sara Del Fabbro

The COVID-19 pandemic marked a turning point for Ikea’s store format experimentation, said Del Fabbro, who spoke at the Retail Innovation Conference & Expo in Chicago this past June. “Even before that we were exploring omnichannel, but this was the tipping point where we realized that the store could play a different role,” she said. “This allowed us to really look into where people are and where they feel it’s convenient to be. This is where the smaller-format stores in city locations come in, but they are also playing different roles in the ecosystem.”

Using Stores to Gather Meaningful Customer Data

Along with improving fulfillment efficiencies by using its store network, Ikea is determined to continue enhancing the in-store experience — both as a way to improve CX and to gather valuable data from customer interactions. For example, Ikea is testing technology that can virtually extend display space setups within its stores.

“We have created some room sets that, thanks to projectors, are creating the impression of being in a kitchen, a living room, a bedroom,” Del Fabbro explained. “Then the customer can play with the furniture, they can make changes and see different things in this three-dimensional immersive room setup. They can then put [items] in their digital shopping cart and complete the shopping experience.”

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“This is also the data that’s allowing us to learn what they’re looking for,” said Del Fabbro. “Which solutions are more appreciated, or what combination they are searching for — combined with the one-to-one meetings with our own furnishing expert and interior designers, this becomes quite important for us.”

Ikea has multiple sources of consumer information, including its own Life at Home report, an annual study based on interviews with 37,000 families. “It’s not only about interviewing; it’s about visiting them in their homes across all our markets,” said Del Fabbro. “They open the door of their home to Ikea and then they share how they use their living space, as well as their needs, frustrations and desires. For us, this is a massive amount of important information; we build the different room settings based on these learnings.”

Ikea also has invested in operational efficiencies in both its small and large stores. For example, the retailer is now using drones to check stock levels in some stores. “I was one of those people making stock checks in our stores, walking back and forth every day, and today it is done by drones — they are flying in many of our stores over the heads of our people,” said Del Fabbro. In addition to freeing up associates’ time, the data these drones gather is shared in real time, allowing associates to determine exactly which items are in stock at any given point.

Closing the Gap Between Digital and Physical

Ikea also wants to tie online and in-store interactions together more closely. Del Fabbro gave the example of people shopping for sofas. There’s a 50-50 split between in-store and online sales of sofas, but “70% to 75% of those online customers are visiting the store just to touch, test and feel,” she noted. “This is showing us how important it is to really understand how [customers] are integrating [physical and digital], because this is the winning part of the recipe.

The retailer also recently opened a Roblox store, perhaps the ultimate combination of a retail space and digital technology.

It’s all part of Ikea’s long-term goals of learning ever more about the customer experience and what shoppers are looking for. “This is a moment in which we are testing and trying; we want to continue to innovate,” said Del Fabbro. “It’s also [providing] moments where we are understanding how to integrate — that is, connecting these changes with the development of the app and online experience.”

For example, the AI-powered Create tool in Ikea’s UK app “allows the customer to take a picture of their living space, remove items and then drag and drop Ikea furniture images,” said Del Fabbro. “This is a combination of physical experience with exploration that is then integrated digitally. It’s also giving you the opportunity to plan your space yourself, and then to buy. We continue to believe that the brand story plays a role, but we also are going to raise the bar on using AR [augmented reality] in the omnichannel journey.”

Committed to Reinvestment that Lowers Prices

The other key long-term goal is keeping its prices in an affordable range for consumers. “We know that there’s less disposable income, that people are struggling and that they need to have Ikea on their side,” said Del Fabbro. “It’s a big enabler for us to combine all these components in order to have a more efficient operation, to be closer to where [customers] are and how they want to interact with us, and then give us the opportunity not only to have a consistent customer experience but also to reinvest in lowering prices.

“If you go to an Ikea store today you’ll see a lot of red,” indicating lower prices, Del Fabbro added. “The red color is because we really want to show that this is not a promotion, not a discount — this is a long-term commitment to lowering the prices and to be more affordable.”

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