Will.i.am wants to build a company the size of Amazon. But IKEA may beat him to it
So I have a bit of a confession to make. Three times in the past nine days, I have visited IKEA. I know, I know… it’s awkward, it’s embarrassing, but I feel I should get it off my chest (please don’t hate me Thomas Lundgren).
And if that isn’t bad enough, throughout those three visits, I haven’t bought a single item of furniture. Yes, there have been delicious Swedish meatballs, perfectly cooked shawarmas, and the best ice cream on the planet for AED1 – but not a scrap of wood. Not even a boring book shelf.
But I am not alone. My three visits contributed towards the – wait for this – 957 million visits to IKEA’s 424 stores in 52 countries during the past year. Even if everyone like me made three visits, that’s 319 million people. If IKEA were a country, we IKEANS would be the fourth largest country on the planet, just behind the US on 328 million people.
What is going on here? What is this strange, bizarre phenomenon that keeps driving us in our hundreds of millions towards a shop that isn’t much fun to be around, has barely any staff, massive queues, and incredibly difficult to find your way around? I haven’t felt this way about anything since I was a teenager.
If IKEA were a country, we IKEANS would be the fourth largest country on the planet, just behind the US on 328 million people
Well, it’s possible that IKEA has cracked the secret of eternal business success. Let’s look at the numbers first: Last year, the group’s revenues reached $43.8bn – in fact, if you plot a graph of the revenues from 2001 when revenues stood at $11.8bn, it is almost a straight curve upwards. Profits in 2018 stood at $1.8bn, actually down 36 percent on the year before, but there is good reason for that, which I’ll come to later.
As for how it manages to keep such big numbers, we all know the basics: IKEA has low prices, a huge range of new products that are constantly introduced, look stylish and are easy to assemble and transport. Thanks to brilliant cost control, it actually managed to lower its prices by an average of 2 percent between 2000 and 2010 – when everyone else was raising prices.
But the real secret of IKEA is that it is the master of reinvention. It has proved that age is no barrier for the 76-year-old company. While many retailers have slowly been embracing e-commerce, comforting themselves that it still accounts for less than 15 percent of total retail sales globally (and much less in this region), IKEA has done the opposite – totally transforming itself. And hardly anyone has noticed.
In 2017, the total number of visits to its e-commerce website reached – and you better sit back here – 2.5 billion. I don’t know of any comparable figure anywhere on earth.
I mentioned the fall in profits earlier (which has also led to job losses). A large chunk of profits have gone into funding 14 new distribution centres for online sales. IKEA has also bought windfarms in Finland and Portugal, some forest in Latvia and snapped up the app TaskRabbit which locates handymen (who can assemble IKEA furniture) close to your home.
The real secret of IKEA is that it is the master of reinvention. It has proved that age is no barrier for the 76-year-old company
All this while a team of just 20 full time designers based in Sweden roll out 2,000 new products from their base in Sweden.
Some of the retailer’s innovation underway includes connecting customers to staff via video links, and using AI tools to help people furnish their homes. Over $2bn of its sales (a jump of 36 percent in a year) now come from the web.
A few days ago, the singer William (apparently he prefers to be called Will.i.am) announced a tie-up with Majid Al Futtaim Group to build “a tech company the size of Amazon.” IKEA, you have to wonder, maybe creating something even bigger than Amazon.
And according to Juvencio Maeztu, one of the group’s top executives, IKEA’s current business plan and model is based on the next 75 years, taking us to 2094.
I suspect even Jeff Bezos may have trouble thinking that far ahead.