E-Commerce Fuels IKEA’s APAC Expansion

Expansive warehouse-like stores, quirky showroom designs, tiny wooden pencils, and DIY furniture assembly are all hallmarks of the IKEA experience, one that has come to define the brand since it began operations more than seven decades ago.

E-Commerce Fuels IKEA’s APAC Expansion

by CMO.com Team

Posted on 01-09-2019

This article is part of our series about 2019 trends, predictions, and new opportunities. Click here for more.

Expansive warehouse-like stores, quirky showroom designs, tiny wooden pencils, and DIY furniture assembly are all hallmarks of the IKEA experience, one that has come to define the brand since it began operations more than seven decades ago.

However, as e-commerce sales and capabilities continue to grow—along with customers’ growing preference to shop online—traditional brick-and-mortar retailers such as IKEA need to evolve and adapt in order to stay competitive yet also maintain the essence of the iconic experience they offer customers.

“It’s a challenge bringing e-commerce and digital into a well-established 75 years of bricks and mortar, but it’s fully integrated into our expansion plan to really utilise e-commerce to penetrate the market,” said Koen Besteman, head of e-commerce for IKEA Southeast Asia and Mexico, in an exclusive interview with CMO.com.

IKEA’s e-commerce rollout in Southeast Asia, which began in Singapore in 2017, has accelerated expansion in the region, enabling the retailer to reach some of the less-populated areas outside of major cities, Besteman says.

“If you take East Malaysia, for example, as a separate market we would not have been there if it wasn’t for e-commerce. We would have waited a couple more years because the potential isn’t big enough to build a whole store,” he said. “Now that we have e-commerce, it allows us to expand into these markets much quicker.”

Consumer buy-in has been notable. Citing the company’s annual report, Besteman said e-commerce accounts for 6% of total sales in Singapore and, within its first three months of operation, accounted for 3.8% of total sales in Malaysia.

“We launched e-commerce in Malaysia last summer, and the response in the market has been great,” Besteman added. “People love it. People use it. It has exceeded all our expectations in terms of potential, in terms of turnover, amount of orders, and also in customer feedback.”

(Fashionably) Late

IKEA’s venture into e-commerce may seem overdue when compared to other businesses, but not so in the furniture space, according to Besteman.

“When it comes to home furnishing, especially when it comes to the furniture itself, like buying sofas, buying mattresses and beds, that [e-commerce] boom came later,” he explains.

It also took IKEA some time “to catch up in terms of the technology,” he said. “You can launch e-commerce in an easy way, but it will not be an IKEA experience as if you were to go to the store. So we wanted to make sure that if we do it, we do it well.”

Of course, a positive e-commerce experience doesn’t stop at the checkout. The delivery of goods is just as important, and, as with any market, Southeast Asia poses its own set of logistical challenges IKEA has had to overcome.

“If you take the Philippines, it’s over 7,000 islands. So you can imagine the sort of logistical challenge we need to solve [there],” Besteman said. “If you take Thailand, it’s governed by Thai law. It’s a fantastic country, great potential, but the transport is a protected business,” which means abiding by certain restrictions.

“In terms of getting the goods to the customer, that is our biggest challenge and that is also then our biggest focus,” Besteman explained.

Holistic Approach

When developing an e-commerce infrastructure, Besteman said it was important it enabled a consistent, cross-channel experience for customers.

“Everything we do must be aligned, whether you shop in-store, on the Internet, in the subway on your mobile phone, or via social media in the future. I think it’s a must that we have all the channels for the customer,” he explained.

As successful as IKEA’s e-commerce services have become, Besteman maintains that its physical stores are not going anywhere; they have a symbiotic relationship with the brand’s e-commerce offerings and, thereby, the overall brand experience, he says.

“They’re all going to stay, and they’re key to the success of e-commerce,” he said. “In fact, if we open a store in areas that are e-commerce only, we increase the turnover on both the store and the e-commerce.”

However, customers may see a change in the way IKEA expands its footprint.

“We’re looking closely at how we build our stores,” Besteman said. “Do we always need the big-blue boxes [warehouse stores], or can some places have mini-stores or pop-up stores? We have some examples in Korea and Thailand that serve as experience centres where customers come to interact with our brand and products. I think it’s one of the key competitive advantages and also one of the key aspects in the IKEA experience that we have those assets.”

Going forward, a seamless user experience is also a major focus of IKEA’s e-commerce strategy.

“That’s where I look to my Web team to optimise the platform so it’s focused on mechanical sales to make it easier to buy, more convenient to buy, and improve that experience for the customer,” Besteman said.

Emerging Technologies

IKEA’s experimentation with emerging technologies has allowed the company to present its products to customers in new and exciting ways.

“We have very strong brand values, and when it comes to establishing and implementing e-commerce in our markets, I think daring to be different—different with a meaning—is really key,” said Besteman.

Take IKEA Place, an augmented reality app that allows users to virtually place furnishings in a space in their homes—which can be particularly handy for those who don’t live close to a store. The products are 3D and true to scale, so users can make sure they’re the right fit in terms of size, design, and functionality for their rooms.

“I think IKEA Place really shows what we’re capable of in terms of going into the future and really using the data, using the AR and AI in a shopping experience,” Besteman said.

Virtual reality is another technology IKEA is open to.

“Locally, I would say it’s more in the exploring phase, where we meet with vendors and see what the possibilities are. From what I’ve seen so far—what we can do in terms of IKEA and IKEA products—we need the technology to develop for a couple more years,” he said.

He added: “We have a very high bar when it comes to the experience we want to give our customers.”

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