“We are not giving ourselves 10 years. We have given ourselves three years to roll this out – to push out digital across the world. We have been making massive investments in organisational structures in the past few months – the digital revolution is coming and that way, if you are in Sydney or Alice Springs, you have the same accessibility.”
Mr Brodin, who took the top job in September, said his goal was to offer same-day or next-day delivery of products, like United States giant Amazon. In metro areas such as Sydney, Brisbane and Melbourne, IKEA customers often can get next-day delivery already.
Company shifts thinking
IKEA owns and operates 367 stores in 30 markets under franchise agreements with Inter IKEA Systems B.V. It has operated in Australia for more than 40 years, but focused on big warehouse stores that average 25,000 square metres.
The IKEA footprint has doubled in Australia in the past five years. IKEA now has three distribution centres to support online shopping, which comprises 12 to 13 per cent of its total Australian sales of $1.39 billion in fiscal 2018.
Mr Brodin said there has been a shift in thinking at IKEA, and it would follow customer trends and use big data to gain consumer insights.
“We are now increasing the knowledge and looking at customer behaviour because of all the activity on the mobile phones, mobile website and our website,” he said.
But, said country head Jan Gardberg, while using big data was key, the shift was also about understanding what worked for families and for different life situations.
The Asia-Pacific region is a focus for Mr Brodin, who previously headed IKEA of Sweden, the arm responsible for product development and supply chain. He started his career in 1995 as purchase manager in Pakistan (where he admits he was the only applicant for the job), and worked his way up through various roles including as assistant to the late IKEA founder, Ingvar Kaamprad.
IKEA recently opened its first store in India, expanded further into China and announced a move to New Zealand.
In Australia, it plans to test smaller stores (of between 3000 and 10,000 square metres) and open planning studios (of between 60 and 100 square metres) in Westfield centres, where consumers can plan kitchens or cupboards.
Double-digit sales growth tipped
However, the Australian retail market is mixed at best, and it will not be easy to win consumers’ dollars amid a tough backdrop with falling property prices, low wage growth and rising non-discretionary costs. According to Citi, Kmart and Bunnings, sales growth is slowing.
However, Mr Brodin remains bullish, saying the higher cost of living in Australia and bigger houses, compared with Europe or Asia, works in IKEA’s favour. “We take market share in downturns,” he said. “Of course we have concerns about the economy, but there is not much we can do about that but focus on bringing lovely solutions to the home. We have full-room sets for $1000 – you don’t have to sacrifice your needs or dreams.”
Mr Gardberg added: “I don’t see anything that will stop us from that double-digit sales growth this year.”
According to the most recent accounts filed with the corporate regulator, IKEA in Australia posted sales from its 10 stores of $1.39 billion for the year to August 31, up from $1.22 billion in 2017. Gross profit climbed 15 per cent to $530.6 million in the same period.
Despite the strong growth, its full-year loss more than doubled to $12.7 million for the 2018 year, hurt by charges and fees including $43.5 million in “franchise fees” and almost $130 million “other expenses”.
Asked to explain “other expenses”, IKEA said: “These are ongoing costs related to the operation of the business.”
The local unit pays “franchise fees”, royalties and licence payments to its European parent, INGKA Holdings, which is registered in The Netherlands.