Following years of U.S. growth, IKEA is reining in its brick-and-mortar expansion efforts: The furniture retailer cancelled planned stores in North Carolina, Tennessee and Arizona. Instead, IKEA is focusing its efforts on eCommerce sales, USA Today reported.
“They have found that in a number of established markets, they are really behind the curve in terms of online,” said GlobalData Retail Analyst Neil Saunders told USA Today. “They want to really start investing and ramping that area up. That obviously means they have to be more careful on things like store expenditure.”
Facing a rapidly changing retail environment, IKEA is looking into urban centers and beefing up its investments in eCommerce.
“To be fit for long-term growth, we are creating a new business model to make sure we’re accessible and convenient for our customers today and in the future,” IKEA Spokeswoman Latisha Bracy told USA Today in an emailed statement.
The news comes a few months after IKEA announced plans to keep up with or increase its heavy level of investment in eCommerce and brick-and-mortar efforts. The home furnishings retailer plans to grow its online business to compete with Amazon and add versions of its showrooms geared toward city centers, Reuters reported. Amazon has two new furniture brands with which the company must contend. In addition, India’s Flipkart and Germany’s Otto and home24 also compete with IKEA.
“Of course, you can see online players such as Amazon and Flipkart growing,” IKEA CFO Juvencio Maeztu said. “What is more relevant than ever is to be as close as possible to the consumer — it has much more power than before.”
In its 2016 to 2017 financial year, IKEA Group, which owns most of the IKEA stores around the world, invested €3.1 billion in its business. Maeztu said the company would invest the same amount between 2018 and 2020, focusing on areas like digital services and eCommerce warehouses.