IKEA has fine-tuned a model to make products that are affordable and sustainable

IKEA, the global home furnishing giant, has long been a staple in homes around the world. Over the past 33 years, the brand has cemented its presence in the UAE and continues to expand with the same vision that has guided it for more than eight decades: creating a better everyday life for the many.

Jon Abrahamsson Ring, Global CEO of Inter IKEA Group, leads the iconic Swedish multinational that has revolutionized home furnishing with its affordable, stylish, sustainable, and functional designs. Closer home, IKEA’s presence in the UAE is driven by Al-Futtaim, the franchise partner that ensures the brand stays relevant in the region. By combining local market expertise with IKEA’s global vision, Vinod Jayan, Managing Director of Al-Futtaim IKEA, has spearheaded several innovations to expand the brand’s footprint in the region.

Recently, IKEA opened new stores in Fujairah and a smaller concept store in Dalma Mall, Abu Dhabi. This growth comes after more than three decades of collaboration with Al-Futtaim.

"Al-Futtaim brings a deep understanding of the local market and cross-breeds it with IKEA’s global standards," says Abrahamsson. "This partnership ensures that IKEA continues to meet the needs of customers in [the UAE] and beyond."

IKEA’s growth in the region mirrors its global evolution. Traditionally known for its large blue-box stores located in major cities, IKEA has also included an omnichannel model, combining e-commerce with smaller store formats.

Globally, 25 per cent of IKEA’s business now comes from online sales, a figure that is reflected in the UAE as well. Abrahamsson points out that this shift is crucial for making the brand more accessible to customers. “We’ve moved from less than 5 per cent e-commerce in 2019 to 25 per cent today, and this is mirrored in the UAE market, where Vinod and his team have been instrumental in executing this strategy.”

While accessibility is key, affordability remains the cornerstone of IKEA’s business model. Abrahamsson stresses that making high-quality home furnishings affordable for more people is IKEA’s number one priority. “Our vision is to help as many people as we can to a better life at home, and affordability is at the heart of that mission,” he explains. With 45 billion euros in global sales and 860 million visitors annually, IKEA’s affordable, functional designs have clearly resonated with consumers worldwide.

However, affordability is not the only focus. IKEA is equally committed to making sustainability a core part of its offering. Abrahamsson emphasises that sustainability should not be a luxury available only to the wealthy. "Sustainability has to be affordable for the many, not just for those with higher incomes. That’s why we constantly work to make sustainable solutions that are both affordable and accessible."

This approach to sustainability is reflected in IKEA’s UAE stores, where energy-efficient products and those created sustainably are increasingly part of the product range. “When you visit our showrooms, you’ll see how we’ve made sustainability an integral part of our offering, from the materials we use to the way we design and produce our products,” says Abrahamsson.

Under his leadership, IKEA continues to evolve while staying true to its core vision even as the brand operates across 63 markets, including key regions like the UAE.

We share excerpts from an interview with Ring on IKEA's business model, its approach to regional markets including the UAE, and its ongoing transformation into a more accessible and sustainable brand.

IKEA has a unique business model involving over 220,000 co-workers and more than 800,000 people in the supply chain. How do you ensure the IKEA formula stays relevant in such a large and diverse operational set-up?

John Abrahamsson Ring (JAR): One is consistency in our purpose. The vision of IKEA is to create a better everyday life for the many, and we do this by staying very focused on one thing and one thing only, and that is great home furnishing products that as many people as possible can afford. We've been doing this for the last 80 years and will continue for the next 80 years. It's the same across all our 63 markets. Consistency is one key enabler of that.

The second key enabler is our integrated value chain. We uniquely design all IKEA products including such popular ones as the Billy bookcase and Pax wardrobe, in Sweden which customers love worldwide. We then produce, distribute, and sell these products in a very controlled, integrated IKEA way.

Finally, we have a strong and living IKEA culture, which we work hard to maintain and secure wherever IKEA is.

Could you explain the specific roles that Inter IKEA Group plays as the global franchisor and how this complements the role of regional leaders like Vinod Jain in driving IKEA’s success in markets like the UAE?

JAR: As Inter IKEA Group, from the global IKEA perspective, we design the products, secure the supply chain, and define the overall conceptual principles of how to meet customers across all our markets. Then, we have 12 very competent franchisees operating the regional and local markets. Here in the UAE, we’re fortunate to have worked with Al-Futtaim for over 33 years. They are experts in the region — understanding customer needs, networks, and local living trends.

They have a lot of retail competence themselves. They can also take the IKEA [competencies] and cross-breed those with things they have in the rest of their portfolio. They combine IKEA’s global standards with their retail competence, ensuring IKEA’s relevance and strength in this market.

IKEA has been evolving from traditional Big Blue Box stores to a more omnichannel model. How do you see this transformation shaping the way customers interact with IKEA in both global and local contexts?

JAR: We view this transformation with great optimism. First, home furnishing continues to be highly relevant, as people need even better solutions for their homes. We have a very relevant business idea and business model. While our big box stores remain central — with 400-plus Big Box stores and 860 million annual visitors to those store concepts. But we now have complemented them with 25 per cent e-commerce and smaller formats. So this is a great journey for IKEA where we can become even more accessible for customers.

For instance, I had a great experience in Abu Dhabi with Vinod and the team. We witnessed how the journey has progressed from a big box store holding 10 per cent market share to today’s omnichannel approach, which includes e-commerce and smaller stores. This transformation helped us grow to more than 20 per cent market share in that region. This was proof of how good it is for IKEA to become omnichannel.

You’ve mentioned that IKEA’s most urgent opportunity is affordability. However, IKEA also balances affordability with maintaining high product quality and sustainability. How do you achieve this balance?

JAR: For IKEA, there’s only one way: we have to make even better products with more functionality that are also more affordable and are sustainable. Sustainability cannot be exclusive to people with high incomes; it must be for everyone. We have to make more sustainable solutions that are also more affordable. We work through our entire value chain, from design to raw materials, production, distribution, and sales; we can work with that full piano to find smarter, scalable, and more sustainable solutions. This process allows us to make IKEA products both more sustainable and affordable.