STOCKHOLM (Reuters) - IKEA Group, the world’s biggest furniture retailer, will maintain or raise already high levels of investment in coming years as it adapts to fast-changing shopping habits, its new CFO said on Wednesday.
In a strategy shift, privately held IKEA, known for its huge out-of-town warehouse stores, is starting to add city-centre showroom formats to entice new generations, while also further developing its online store to stave off competition from internet giants including Amazon.
IKEA must adapt if it is to stay ahead of online-only players such as Amazon (AMZN.O) - which in November launched two furniture brands of its own - as well as Flipkart in India and Germany’s Otto and Home24.
“Of course you can see online players such as Amazon and Flipkart growing,” Juvencio Maeztu told Reuters in his first interview since becoming chief financial officer of IKEA Group last month.
“What is more relevant than ever is to be as close as possible to the consumer - it has much more power than before,” he said.
That partly means maintaining heavy investment, even if it puts pressure on profits as it did in the financial year through last August.
IKEA Group, owner of most IKEA budget furniture stores worldwide, invested 3.1 billion euros in stores, distribution and customer service networks, shopping centres, renewable energy and forestry in its 2016/17 financial year.
Maeztu said total annual investments in traditional store expansion, new city-centre formats, digital services, e-commerce warehouses and distribution would be as high or higher in fiscal 2018-2020 as in 2017.
“We will invest in being more accessible,” he said. “We will keep investing the same or even more over the next three years,” he said.
IKEA also says its strategy of surveying households about their everyday frustrations and ambitions, for instance by making home visits, gives it a competitive edge.
Maeztu hopes to draw on his recent experience as IKEA’s manager for India, where in 2012 the Swedish group was the first foreign single-brand retailer to get approval to open stores in the country. It aims to open its first Indian store, in Hyderabad, early this summer.
In India, his efforts to get close to the customer included 800 visits to family homes either by himself or members of his team during his time there.
“This is something we will do even more,” Maeztu said.
IKEA, whose founder Ingvar Kamprad died in January at the age of 91, operates through a franchise system. Inter IKEA is the brand owner and franchisor. IKEA Group owns 363 stores in 29 markets out of a total of 413 storeS in 49 markets.
Last September IKEA Group made its first-ever acquisition outside the group of companies that make up IKEA when it bought TaskRabbit, a U.S. online marketplace for odd jobs - such as furniture assembly. It has flagged more acquisitions or partnerships could be on the cards.
For the new CFO, that strategy shift spells a new way for the company to keep a lid on costs, a necessity as the market transforms.
“TaskRabbit is an example of partnership in order to really keep prices down at the same time as we are offering the best of IKEA,” Maeztu said.
“We are exploring other partnerships, but we don’t have anything specific (to communicate) now,” he said.
Reporting by Anna Ringstrom; editing by Niklas Pollard and Susan Fenton