If you’ve ever found Ikea’s website too clunky, or its $99 truck delivery highway robbery next to Overstock or Amazon Prime, you aren’t alone. Once a retail revolution, Ikea’s pine- and umlaut-laden megastores have begun to see their profit margins wane in the online age, something the company’s executives acknowledged during an earnings report yesterday.
From the New York Times:
“We weren’t one of the early adapters. But we’ve matured in our thinking about it,” Peter Agnefjall, Ikea’s chief executive, said by phone. “We realized this is not a trend, it’s a megashift.”
Ikea, which operates 315 stores in 27 countries, said on Wednesday that net profit for its fiscal year through August rose 0.4 percent from the previous year to 3.33 billion euros ($3.76 billion), far slower than the 3 percent growth the retailer logged last year, and its 8 percent growth in 2012.
It’s worth noting that sales were up year-over-year by almost 6% worldwide, but that wasn’t enough to offset higher labor costs. And as the online furniture market grows from $10 billion today to a projected $14 billion in 2020, Ikea wants a piece of that meatball.
Ikea’s website is an atrocity, especially given that the company does $33 billion in revenue a year. 70% of its inventory is now online, but the newest products are often presented as virtual PDF catalogs rather than interactive, shopping cart-ready items. Nothing about the Ikea store experience–that overwhelming-yet-inspiring Swedish themepark–really translates to the online experience. And Ikea’s convoluted product lines, filled with furniture ranging without discernible logic from budget to moderately expensive, is a problem of core design–information hierarchy.
But most of all, how do you present the core honeypot scam of an Ikea store–where you walk in wanting a dresser but walk out with new rug, light fixtures, and coffee table, too–on a webpage?
Assuming Ikea can answer these questions, maybe they have a shot. But if this notoriously tightwad, privately owned, nonprofit-sheltered company isn’t happy with its profit margins now, online sales may not be the answer they’re looking for. Because online, you have to deal with shipping, and people don’t like to pay shipping on anything. It’s hard to imagine Ikea’s corporate mentality giving in on shipping to compete with the Amazons and Overstocks of the world, which both feature free shipping options, even on furniture.