The Changing Face of Retail: Digital Transformation at IKEA- Part II

[In my previous post on The Changing Face of Retail, I had referenced IKEA among the few succesful firms who have been able to make a transition. Why not look at this as a test case to see how Retail can step up to the challenge of today. Here's an indepth four part series on the Digital Translation of IKEA.


Part –I, covers the challenges faced by IKEA, and a background analysis of IKEA’s traditional consumers and how changes new markets, and changing consumer behaviour creates an imperative for Digital Transformation. This part ends with identifying the key elements of a succesful digital transformation and how IKEA's senior leadership went about this.

Part –II, breaks down IKEA’s business into different process domains (going from external- Consumers, to Internal- Back end), and looks at the recent initiatives in each. We will take a close look at some of the initiatives rolled out/ and possibilities in Consumer Insights and Consumer Engagement.


Part- III, is devoted to Consumer Commuincation, which is extensive and deserves a separate article by itself.

Part- IV, The concluding part looks atthe remaining process areas- Innovation, Last Mile Connect, Logistics/ Leaner Business, and summarizes the overall impact with public domain data.]

Now that we have looked at other aspects, lets take a quick look at what Jesper Brodin meant by "Change Everything Almost," through a glance through the visible manifestations of IKEA's Digital transformation over the past two years.

Let's start from the easy part, external manifestation/ changes that are most apparent. And also areas of possible intervention.

A. Consumer Insights: IKEA understands the consumer. But adding on capabilities on Big Data and advanced analysis of In-store data can yield rich benefits:

• #smalldata & #bigdata- IKEA has always been masters of small data (what I mean is simple analytics- Quantitative and Qualitative that give insight into why something is as it is). Drawing upon ethnological insights from it's pool of designers, home visits, it has an amazing understanding of the lives of consumers across the world. (You can read more about some of the work IKEA does in understanding people's lives on the blog @ IKEA Life at Home). Even before the current digital transformation phase at IKEA, the company had successfully explored Big Data for social listening (Listening Hub- Uncovering FB group and launch of the "Big Sleepover" Campaign- more about this later). But that's the start. Big Data, once properly classified and integrated across multiple sources can throw up amazing correlations. IKEA has already had some amazing successes with its data mining (IKEA Family- Loyalty Program- members are 35% more profitable than non-members; Source: “IKEA FAMILY, driving customer value”) but that's just scratching the surface. The possibilities are immense, controlling for geographic running an ARM algorithm like a simple Market Basket Analysis can help redesign of catalogs, apps, websites and even a change in layout of segments of the store, say kitchen, boosting chances of cross selling. Even analysis of ERP Sales data lends itself to fine tune production and distribution schedules (for e.g. if a typical demographic has a phased purchase cycle- but basic stuff, followed by a more gradual fit-out of home, is it possible to ensure that stock-outs are not happening by dispatching JIT materials). The possibilities are endless, and IKEA has demonstrated that they are willing to walk the path. The two points that I would stress in any application of Big Data are:

1. Big Data is great, but Small Data is equally important. The key challenge would be to merger insights from both sources. Everyone knows the theory, but how its put together is the real test.
2. The perennial challenge of Big Data is integrating all data sets and actually getting down to analyze it. While there are no reliable figures, but global estimates are that major firms still analyze less than 30% of all the data that they have. The drive to push these numbers up will be key for any firm in its transformation journey.

• IoT and AI in store- While GDPR, and continued public scrutiny of privacy issues stop any company from individual profiling, it is possible to anonymize data feeds from smart in-store cameras and analyze them. The IKEA stores where consumers spend so much time is a data set ready for exploration. As Marketers, we struggle to get an insight into how consumers behave, and here's data already present, waiting for analysis. Imagine a scenario, where we are able to sub-segment the key IKEA consumer groups (couples with infants, couples with school aged kids, couples with adolescents) and automatically map their patterns- What was their store journey, what are the items they stopped at but did not pick up, after how long did they take a break, who was the decision maker, etc. And this data can then be used to customize loyalty programs, redesign store layouts, craft communication.

B. Consumer Engagement:

• Augmented Reality IKEA Place- Launched in 2017 for iOS, today IKEA Place is also available on Android. One of the most practical innovations that came to the Homeware category, the App was supposed to support consumer decision making before making a purchase at a store. The basic premise being that consumers could shoot their homes and virtually place IKEA merchandise in the home before deciding to purchase. Now coming from a related category (paint Visualizers have been the Holy Grail in my industry- ask any struggling Marketing Manager in any paint company around the world), I can intuit the advantages of it. Consumers find it extremely hard to imagine how a piece of furniture and decor would look like in their home. Probably the biggest drawback to a real take off of Decor (furniture, paint, upholstery) category online has been this. So after reviewing the App I would say hats off to IKEA for coming up with this. The 3D rendering of objects were extremely good. The ease of use in choosing and placing objects is amazing. The App does really give a great feel. I found it extremely helpful to estimate whether furniture would fit in and in the suggestions it gave based on an image of my room. Having said that, let me also highlight some of the issues I faced. Firstly, the App was slow and kept hanging, and the UI could have been a little more user friendly with guidance steps. But these are still early days for immersive AR, and I am sure the developers will iterate and fix these problems. Where I felt that the App really misses out it's true potential are the following:

1. No linkage with my IKEA Account- As a devout IKEA Family member, being able to link my IKEA Account with the account and an email id would be great. Not only does it give me a way to save some of my created work in a secure place, but also allows IKEA access to data (post user permission) of the kind of goods that I am interested in. Integrating the Loyalty program with IKEA App data would be a future gold mine
2. No scope of in App purchase- OK, as a loyal/ dedicated consumer, I have made the effort of spending a few hours playing around with the App and trying out furniture. Then why are you forcing me to go and visit a store. Of course, I can open up the IKEA website and order online, but why?

• Virtual Reality- In 2016 IKEA debuted its Virtual Reality Kitchen Application. The simulation is a great way to engage consumers and could be a trend setter for the future allowing customers to get a feel of the furniture before choosing something. The longer the consumer stays involved in the game, the higher the affinity and emotional involvement with the brand. IKEA even released the app on popular gaming sites.

• Hybrid 'Phygital' Events- Harnessing social listening, and creating events centered around it's brand has been a hallmark of IKEA's innovative engagement strategy with its consumers. While not a part of the current Digital Transformation at IKEA, let me share a couple of brilliantly executed campaigns to highlight the company's culture of innovation keeping consumers at its heart. Over time some of these campaigns have created their own following across social media and become cultural memes:

1. IKEA’s Furnished Climbing Wall- To create a buzz around it's 30th store opening in France, IKEA created a climbing wall outside the store built with actual furniture. Not only did it create buzz, but no amount of advertising could have conveyed the sturdiness of its furniture than this real life demo.
2. The Big Sleepover- Picking up on online chatter of a group called "I want to sleep at IKEA" in UK in 2011, the company organized a sleepover at one of it's warehouses. Over 100,000 people participated in a Facebook draw to be among the 100 lucky winners. The firm arranged for hot chocolate, desserts, massages, sleep expert advice and even a bedtime book reading. They got to choose their bed linen and have a fun night out. The event had 330 pieces of coverage and generated over 15,000 click through to the IKEA website. Since then the event has been rolled out across the world in cities as far as Hong Kong and Vancouver.

• Experiential Shopping- Consumers world across have tended towards online purchases, and even when they are shopping in stores their expectations have changed. Transactional shopping has given rise to expectations of experiential shopping in 'smart' Retail outlets. Rise of affordable scalable IoT and AI solutions are helping building momentum. There are three immediate areas that come to mind when thinking of business applications in store for IKEA:

1. Interactive Shopping- The IKEA Store App allows consumer to browse through the IKEA catalog online, remember selections, find out more information about select models.
2. Interactive displays- By integrating AI and Smart Camera's into Retail outlets, it is possible to mine rules on broad customer segments. Based on these rules, it is possible to create sets of customized messages for select demographics. For example, suppose we create a data set that is able to identify new couples based on body language. As these couples move through the Bedroom section, the Market Hall, if they pause before a section, an interactive display can display messages targeted at pushing items that similar cohorts have bought. IKEA is already doing something similar, with iBeacons to announce pop-up stores or enhance shopping experience.

1. Use of Touchscreen and self explanatory videos- IKEA has been one of forerunners among retailers in using touchscreen in store. However, where they have set themselves apart in how they have executed. As the below video, shared from Marketing Week: Retailers should look to Ikea for tech inspiration, shows how simple tech executed creatively can encourage consumers to experiment with the ubiquitous Touchscreen panels that Retailers seem to scatter around the store, but consumers hardly use. The author goes on to describe how this simple video made him stop and engage with the product trying to customize his own sofa.

Part- III of this series will look at IKEA's digital communication strategies. Given how creative IKEA Commercials have been over time, this is going to be an interesting one. ;)

Disclaimer: This disclaimer informs readers that the views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organization, committee or other group or individual. The author has no relationship with IKEA (paid and/ or unpaid) or any of its subsidiaries.