Big box update: IKEA

Planning Studios in Australia

The first of these smaller format sites will be up to 500sqm and open in north-west Melbourne, followed by Newcastle (NSW) by the end of 2022

Thu May 19 2022

IKEA Australia and New Zealand country chief Mirja Viinanen told The Australian Financial Review it will launch its small-format Planning Studio concept in Australia this year.

The focus of the Planning Studio is to help customers to create "dream" kitchens and wardrobes, and there will not be any food served on site.

According to the big box home improvement retailer, the Planning Studios are part of its growth strategy for Australia.

Each studio will have a collection point nearby where customers can collect their products upon ordering. The goal of the format is to provide customers with more flexibility when accessing the retailer's products. Ms Viinanen said consumers wanted IKEA's products to be more conveniently accessible. She said:

Convenience is at the heart of our strategy. We will continue to transform and test new formats like the new Planning Studios to be able to meet our customers where it is convenient for them, and we are constantly researching where this need is the greatest to inform our expansion strategy.

The company expects the Planning Studios will help gather important customer insights and feedback during the first few months of opening. Based on this data, IKEA will consider if and where to open additional Planning Studios in the future.

Ms Viinanen is also keen to further penetrate online. Pre-pandemic, IKEA generated about 12% of its sales online, but it now accounts for about one-third of group sales. The AFR reports sales reached AUD1.62 billion in the full year to August 31, 2021, based on accounts lodged with the regulator.

Ingka Group, the largest franchisee of IKEA stores around the world, recently said that it would invest EUR3 billion by the end of 2023, building new outlets and remodelling existing ones to cope with "increasing demand for home deliveries".

The money will primarily be used to modify its trademark out-of-town (suburban) outlets so they can double up as e-commerce distribution centres. Ingka Group retail manager Tolga Oncu said told Reuters:

Most of it will be in our existing stores, since we talk about transforming, redesigning the purpose of the square metres.

In the past few years, Ingka has adapted to the rise in online shopping by developing smaller stores, revamping its website and rolling out a new app as well as digital services such as remote planning tools. Mr Oncu said:

We feel we have a catch-up to do on the back-end of our operation (and) we have realised that by including stores in our last mile and fulfilment design network we can create a win-win situation.

Shipping online purchases from the warehouse sections of nearby out-of-town stores will mean faster and cheaper deliveries, with lower emissions, than by shipping from a few logistics centres..

Instead of building central warehouse capacities for online buys, why don't we send it from our IKEA stores?

Sustainability

It is not just all about store expansion for Ms Viinanen who is also the company's chief sustainability officer.

IKEA has introduced more than 30 big-impact, sustainable-focused initiatives globally, with some in Australia. A clean energy storage initiative was launched to support the South Australian power grid as IKEA aims to achieve 100% renewable energy by 2030.

The retailer is also using high-end technology to meet some of its sustainability goals, such as robotic automated box cutters and shredders in the distribution centres.

According to IKEA research, nine out of 10 Australians believe businesses can do more to reduce emissions, and Ms Viinanen is firmly committed to delivering on those expectations. Other initiatives include its circular hubs in stores where shoppers can buy floor stock or get furniture others have returned through the buyback scheme. She told the AFR:

All of this should be everyday business decisions, as part of business helping to create better everyday life.

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