The world's biggest furniture retailer is figuring out how to pursue ambitious climate goals without losing out economically.
Ikea, the Swedish company known for making smart, inexpensive furniture that stands little chance of becoming a family heirloom, wants people to hold on to its pieces for longer. To that end, the company intends to broaden the services it provides to include things like new sofa coverings, and the option of fixing up old pieces.
Moving into the second-hand and refurbishment and repair markets represents "a huge business opportunity rather than a competing affair," Ikea's Sustainability Manager Lena Pripp-Kovac told Bloomberg.
The company says it plans to use only renewable and recycled materials in its products as part of a target of having a positive impact on the world's climate by the end of the next decade. The question is how to achieve that goal without losing money.
Torbjorn Loof, the chief executive officer of Ikea concept owner and worldwide Ikea franchisor Inter Ikea, says the key is continued expansion, more focus on services and on offering products that help people maintain their existing Ikea pieces.
"From a growth perspective, of course our expansion becomes more important and of course we also see that the service sector is more important," Loof said in a phone interview.
Given the scope of Ikea's climate goals, Loof said it may need to look into acquisitions, because the new strategy "creates a need for us to move faster on a couple of topics," like coming up with new materials and going more digital. The company, which bought San Francisco-based assembly-provider TaskRabbit last year, is currently looking at "a couple" of potential acquisitions, he said.
Ikea has yet to define a clear strategy for its new services but Loof says he's looking into developing more services in-house, teaming up with partners and even outsourcing. Extra revenue could come from things like assembling pieces at customers' homes, door-to-door delivery and repairs.
The company expects more people to spend money on accessories like sofa covers or replacement legs for tables, instead of buying a whole new piece of furniture. In addition to boosting sales through such offerings, Ikea also expects material costs to come down as it moves to use only renewable and recyclable materials.
Moving into new corners of the globe will also become more important, according to Loof. Ikea is already in the process of opening stores in India, and recently said it would expand into Chile, Colombia and Peru, in its first foray into South America.
-- Bloomberg News