Ikea has seemingly defied the consumer downturn when it posted a 5.6% sales rise for its 2022 financial year.
The retailer even boasted of an “upswing” in big-ticket strongholds like kitchen, bedrooms and storage as the cost-of-living crisis did not deter shoppers from investing in their homes.
Even in the hard-hit UK, trading was strong, with the country one of the homeware giant’s top growth markets.
The retailer may not have unveiled its profits for the year yet, but Tolga Öncü, who leads retail operations at Ikea operating company Ingka Group, where he holds overall responsibility for market penetration, expansion, fulfilment and the commercial agenda, is toasting an excellent performance.
“This is the most exceptional year I have experienced in my 20 years at the company.” he tells Retail Gazette.
For the retailer has not only battled soaring inflation, it has also faced the huge challenges caused by the Ukraine war, supply chain disruption, and the lingering impact of the pandemic in some regions.
So, how has it overcome these sizeable challenges?
Öncü admits that Ikea is still benefiting from the trend of consumers spending more on their homes. This is driven by both people working more and, as consumers look to cut back on going out, socialising more at home.
“Now more than ever we see that importance of life at home in the hearts and minds of the many people is super high”, says Öncü.
However, it is the retailer’s strategy of being more affordable, accessible and sustainable that has allowed it to capitalise on this trend.
“Our affordable and sustainable home furnishing offer solves their needs, dreams, desires and frustrations in their everyday life at home,” he says.
Affordable
As Ingka Group CEO Jesper Brodin says, “being affordable is in our DNA”.
“It has never been as important as now when we see an increasing cost of living. Our primary aim remains ensuring that the Ikea offer always brings added value to our customers,” he says.
Inevitably, Ikea customers have been gravitating towards more affordable products – and the retailer is making sure there’s lots to choose from.
Unlike the majority of the retail industry, Ikea is managing to lower prices in spite of rocketing inflation.
The retailer has found cost savings in areas like supply chain in the second half of its latest year, which it had started to invest in lowering prices and “creating even more affordable offers”, says Öncü.
“Ikea is all about offering as low prices as possible so as many people as possible can afford to buy our products. When it’s possible, we look to decrease our prices to make them more affordable,” he says.
“Since September we have seen the opportunity to do so in some of our markets and the response is immediate and very good from consumers.”
Öncü says its keen prices have not just encouraged Ikea shoppers to buy more, but has attracted lapsed customers back to stores.
Sustainable
The retailer is also committed to becoming climate positive by reducing more greenhouse gas emissions than its value chain emits by 2030.
It has made bold investments in wind and solar projects in Germany, Spain, Sweden, and Poland and has purchased land in New Zealand and Florida where it will plant new forests and ensure increased biodiversity.
However, sustainability has actually driven sales for Ikea over the past year.
The products the homewares giant has created to encourage shoppers to become more sustainable in their own homes have held extra appeal this year.
Customers have been snapping up products that help them reduce their energy consumption amid soaring electricity and gas costs.
Öncü says: “With the circumstances the world is in, shoppers are looking for solutions that can reduce their energy consumption, water consumption, and food waste.
“Our customers are shopping smarter and looking for more affordable and more sustainable solutions by consuming less energy.”
One example is Ikea’s £5 Abäcken water nozzle, which helps customers cut down on water usage by up to 95% in mist mode.
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Accessible
The final prong in Ikea’s strategy has boosted the retailer’s customer base over the past year.
The business has invested in both improving its omnichannel offer and widening the reach of its store estate.
Ikea is famous for its out-of-town big boxes, however, it has been growing its stores in city centre, including the retailer’s Hammersmith store, which opened in February.
Öncü says these stores “get Ikea closer to where people work, live and socialise”.
This is attracting a new customer to Ikea; shoppers who have been fans of the retailer but haven’t been able to visit their out-of-town stores because they do not drive, for example.
Öncü says the new format stores complement its existing big box stores and the footfall has “exceeded expectations”.
The retailer plans to open more stores across all formats in the year ahead, including a city centre flagship in London’s Oxford Street.
The 239,000 square foot space, which includes retail and office space, will open in the former Topshop store in autumn 2023 and Öncü promises the flagship will offer “the best and latest version of Ikea”, including new digital tools and other “surprising elements”.
But it’s not just about new stores. Ikea is vying to make its existing stores more inspiring and more relevant.
This means both introducing more elements that make use of its expertise, such as the AI online planning tool Ikea Kreativ, and improving its fulfilment from store capabilities to both shorten lead times and reduce costs.
Being affordable, accessible and sustainable may sound simple, but they are key ingredients that have made Ikea as relevant as ever over the current year – and look likely to do so for years to come.
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