Ikea
Ikea is targetting global domination with plans to make its products more affordable. The retailer has just opened its second store in Dubai, at the Festival Plaza in Jebel Ali. Image Credit: File photo

Dubai: Jon Abrahamsson Ring would definitely have liked what he saw on the opening day of Dubai’s newest mall, the Festival Plaza. A queue started forming to get into the Ikea store - the UAE’s largest - a good two hours before the opening at 10am. And once it opened, they just kept on coming, with the decibel levels .

It was a day when old-fashioned brick-and-mortar shopping was definitely back to its trending ways. And that you didn’t need the latest iPhone launch to get shoppers lining up ahead of the shutters being raised.

For the CEO of Inter Ikea Systems, the Swedish company that owns the “IKEA” concept and oversees its global franchising arrangements, it was just another confirmation that the physical matters... at least in the home furniture and accessories universe. “You could have all the data on people shop - but there is a big need to touch home furniture, get a feel of the chair. That need will remain even when digital has made shopping so easily accessible.”

Currently, online for Ikea adds up to 8 per cent of its global sales, and Ring sees that ticking up to 15-20 per cent in the near term. But the one thing Ikea will not be doing is try and force the speed at which online is growing.

“Let the customers decide that - what we have done is integrate a seamless experience for them to choose how to buy,” the CEO added. (Ikea has also been making headway on the “omni-channel” side, where shoppers use online to buy and then proceed to the store to pick it up at their convenience. This service is available in the UAE as well. Though omni-channel sounds a relatively easy process for retailers to implement, it hasn’t always worked out that way for them. Ikea, thus, is one of the exceptions in pulling it off.)

Last year, Ikea generated 38.8 billion euros in retail sales, while its network totalled 422 stores.

Get ‘more affordable’

And as Ikea keeps adding more locations and geographies, Ring has certain designs on where its product prices should be. “Yes, we do cater to a very wide category of shoppers - but our intent is to become even more affordable,” he said. “We have 700 million customers, and that’s fantastic. But we could easily double that... even go triple.”

Clearly, nothing short of global domination is what Ikea is aiming for. “The way to do that is make the brand more affordable - there is potential to make that work in Europe and America as much as in the Middle East, India or Latin America,” said Ring. “In the markets we are in, two-thirds of the population have, what we call, “thinner wallets”. We need to have the products and prices that’s accessible to them as well.”

Any such tweaks in pricing strategy will play well in the Indian market, where last year Ikea finally managed to open a store. There were many twists and turns Ikea had to go through up to that point, as the Indian government reworked its archaic laws on foreign ownership in the retail sector.

“It never was going to be a 100-metre dash in India,” said Ring. “But it’s a market that we plan on being in for the next 50 years, 100 years. We have learnt a lot along the way, and we will be part of that market.”

Well covered

As for the UAE and other Gulf markets, Ikea’s got it covered. In the UAE, its franchise partner, the Al-Futtaim Group, operates four stores, the latest - and largest at 35,000 square metres - being the one at Festival Plaza. But Ring says it needn’t be all about having big layouts all the time.

“We are learning to do things using a smaller physical footprint, like the 2,000 square metre outlet we have in Cairo,” he added. “By using a smaller store, we can integrate it with our digital presence. I don’t see store sizes as a factor - what matters is how well we get through to the customer.” Based on the evidence from Festival Plaza, Ring’s got that well covered.