Ikea global retail boss Tolga Öncü is feeling chipper after finishing its last financial year on a high.
Operating profits edged up 4% from £1.8bn (€2.2bn) to £1.9bn (€2.3bn) in the year to 31 August at Inter Ikea, the owner of the Swedish furniture giant, despite a 9% drop in sales, as the retailer decided to cut prices in the face of the cost-of-living crisis.
“I am quite proud of the work that we have done during FY24,” he says, explaining the business chose to “really go in when it comes to affordability”.
Öncü notes that stengthening the retailer’s value offer, which has seen continuous price reductions across the year, has helped to reach more customers and “increase the amount of people coming to Ikea”.
“We did one of our biggest historic price reductions during the year, and we are seeing that there are possibilities for Ikea to continue – probably not with the same extent but to find our way back to where we were prior to the pandemic and the decades before.”
These savings will mostly materialise from opportunities to “improve out operation, lower the material cost and improve the product design”, says Öncü.
Improving value will continue to be a big trend at Ikea in its current financial year as Öncü says consumers are still cautious on big purchases.
“Six months ago, we said that wallets are thinner than ever before, people are impacted by the inflation, the high interest rates, and if I look generally, not much has changed in that perspective,” he says.
However, he’s optimistic that “the second half of the year will be slightly better than what we have now”, adding that “we will start seeing some kind of movement towards a better situation starting from February and March”.
Marketplaces
Ikea has always been at the forefront of innovation and its latest development includes the launch of a peer-to-peer marketplace, which allows Ikea Family members to buy and sell used furniture.
Öncü points out that it made sense for the retailer to launch its own reselling platform given that the vast majority of home furnishings that are being sold between consumers on platforms like Facebook Marketplace are Ikea products.
“There is a big opportunity to help facilitate that, with easier access to Ikea data about those products,” he says, explaining that the retailer will populate listings with product information such as sizings and descriptions as well as “some inspiring pictures of that product in different environments next to your pictures”.
Users will also have access to repair kits, assembly instructions, and spare parts, which “no one else can do” and is currently offered to customers of its core retail business.
Öncü says the response to the new marketplace, which is currently being trialled in Madrid in Spain and Oslo in Norway, has been “tremendous” so far and is feeling optimistic about its future.
“Our job now is to measure, follow up, tweak and adjust the things that don’t work, and then by the end of this calendar year, to take the decision on how do we scale this now to all the markets where we operate.”
“I’m quite optimistic…it’s more that we find a way to do it right, as low cost as possible, and as good service as possible for the both seller and the buyer,” he says.
Betting big on sleep
Öncü shares Ikea’s big focus for its new financial year is sleep, which it kicked off in style by breaking the world record of the largest two-piece pyjama gathering at an event at the end of the summer.
The category is already its third biggest and with more customers prioritising quality sleep than ever before, it seemed like a no brainer for the retail giant.
“We see a big growth opportunity in sleep-related products,” he says, explaining this stretches beyond beds and bedding and into sofa beds and blinds.
“We have decided to focus on six sleep essentials, helping the many people out there with affordable and sustainable solutions to improve the pre-requisites to sleep better, focusing on comfort, colour, air quality, light, sound, and decluttering,” he says.
Öncü says there are many cultural differences to consumers’ sleep preferences.
“If I take Poland as an example, 41% of the Polish people are actually sleeping on a sofa bed in the living room,” he says.
“So when we say better sleep, it’s not only the bedroom, the bed mattress – it’s also sofa beds so that’s why we are introducing 10 new sofa beds to really cater for the different sizes of wallet, different sizes of space, different style groups, in order to serve the many people who are sleeping in their sofa bed.”
He also says that light is an important factor behind great sleep, with Ikea offering “window solutions” for shoppers.
The focus on sleep will come to life through new departments in store, Öncü shares, alongside improvements to its website, which represents almost 25% of Ikea’s turnover.
“We are on the journey to translate our Ikea knowledge of how we present the range the products in our stores to how can we translate that into the app and the web,” says Öncü.
Furniture lovers can sleep easy knowing that Ikea has its bedroom needs covered.
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