Ikea was saved by online sales during lockdown

Ben Rund

By Ben Rund

On October 28, 2020

Ingka Holding (IKEA) Chief Executive Officer, Jesper Brodin, discussed annual results, plans to expand retail store locations, and the company’s reliance on online sales during the coronavirus pandemic in a 06 Oct 20, Bloomberg interview.

Jesper Brodin confirmed their massive flagship stores are still a key element in the IKEA strategy. The flagship locations have a role beyond “retail” and play a key role in delivery and fulfillment for IKEA’s e-commerce business: 60-70% of online orders go directly to the stores for fulfillment.

The omnichannel strategy remains key to the IKEA brand, as 4 of 5 customers are using different channels for their informed customer journey.

“Online saved us,” CEO Brodin said in that same interview. Indeed, IKEA’s online revenue grew by 45% during 2020. Online revenue grew from 11% to 18%, which helped them stem the overall revenue loss due to 75% store closure during some key times of the year.

IKEA’s ongoing investment focus will be in three main areas: digital, store refreshments, and sustainability. IKEA is also testing furniture as a service, but this will take time to establish the business as a concrete customer need.

How can data level up experiences for staff and customers?

Selling furniture, or any product or service online is not a simple process. Without correct, complete, and current data, e-commerce sales are not possible.

Two examples of why it’s data that determines the digital commerce experience:

    • To upgrade my work from home experience, I ordered from IKEA a “Bekant” desk, which has a motorized way of adjusting the height. Product information played a key role in selecting the right table, as size mattered to me.

      My previous table was too small as I need more working space for monitors, camera holder,s or mics for my videos and podcasts. IKEA offered a home office bundle with this desk. In this case, IKEA offered the “EILIF” office wall to help complete the look.

      EILIF was a nice option – the office “wall” helped reduce my work noise from my family, who have also been spending plenty of time at home as well.

      1. The data that came for this bundle could have been manually adjusted by a smart merchandising manager who knew both products could work in tandem for customers.
      2. Or, it could have come from a Product Information Management (PIM) tool employing built-in AI that saw patterns of both products being sold together and made the connect to bundle the products together and ease the shopping experience.
      3.Or, the merchandising manager using a smart PIM could have picked up that EILIF was moving slowly and wanted to juice the sales by providing a smart bundling offer.

      Selling thousands or millions of products online is a job that eats resources and has a deep impact on e-commerce KPIs as conversion rate, cart value, or returns. For companies using PIM, conversion rates can increase by 35%. Margins can increase by 44% using PIM. And valuable e-commerce engine resources can be freed to increase speed up to 75%. Data feeds e-commerce. Make sure it’s the right data to make the right offer to drive optimal experiences.

 

  • As a second example, we look at a furniture business. Put yourself in the shoes of a product manager, category manager, or e-commerce manager whose job is to increase online revenue by selling the whole collection in this image:

IKEA

First, you must define a collection reference, and have entity type “collection” relationship to products with inline editable attributes – all in your master data experience platform (MDxP). The frames could be made of a material (in this example, it’s resin) and one color (and one color alone) relates to the collection.

If you drill down to the cushions, there is a Cushion Parent Style. In this case, it’s a C084 Kipling Sofa Cushion. One level down is the parent style plus the type. For this collection, types are Seats and Backs, Seat Only, and Back Only. One level down from that is by Individual Piece. For example, a C084 Left Seat.

The cushions itself contain raw materials: fabrics, trims, foams, boxes, and other information. So, before you are able to sell a single pillow, you may need to control a list of attributes like in this example: 

  • Water Repellent: True/False
  • Care Instructions: Machine Wash, Spot Clean, Dry Clean, Hand Wash
  • Construction: Solution-dyed acrylic fiber
  • Color: Blue, Green, Gray & Silver, Brown, Navy, White, Ivory & Cream, Orange, Pink, Red, Yellow & Gold, Black, Purple, Beige, Teal
  • Shape: Square, Rectangle, Round, Novelty
  • Pillow Type: Throw, Lumbar, Bolster Floor, Euro
  • Location: Indoor/Outdoor, Outdoor Only
  • Brand
  • Pattern, Solid, Geometric, Floral / Flower, Striped, Plaid, lkat, Damask, Animal Print, Chevron, Toile, Paisley, Polka Dots
  • Size: 14” and Below, 12×18”, 12×20”, 14×20”, 14×24”, 16×16”, 17×17”, 18×18”, 18×24”, 20×20”, 22×22”, 24” & Up
  • Price:
  • Cover Material: Cotton, Linen, Silk, Synthetic, Acrylic, Cotton Blend, Sunbrella, polyester/Polyester Blend, Velvet
  • Style: Modern & Contemporary, Cottage/Country, Traditional, Coastal, Mid-Century Modern, Rustic, Scandinavian, Glam, Industrial
  • Fill: Polyester/Polyfill, Feather/Down
  • Life Stage: Adult
  • Relative Size: Small, Medium, Large, Over Sized
  • Height:
  • Width:
  • Features:
  • Customer Rating:
  • Holiday Occasion: Christmas, Valentine’s Day, etc.
  • Personalization: Customizable, Non-Customizable
  • Cover/Insert: Pillow Cover, Pillow Cover & Insert
  • Commercial Use: True/False
  • Decorative Accents: Applique, Buttons, Embroidery, Fringe, Ruffles, Tassels
  • Single/Set: Single Piece, Pillow Set (2)
  • Style Edge: Double flange, single flange, flat welt, and leather corner cap

Very quickly, this gets complicated. When finally ordering a pillow online, based on that information, you are able to display the field dependency: Collection > Frame Style > Cushion in your online store. And this was only a sample of attributes.

Now you can see why a master data experience platform for digital commerce can render itself useful immediately.

Understand your customer

Every CEO claims in the company’s annual report that customer-centricity is key to their company. But from the idea to execution, there is often a big gap.

Customer 360 view has four levels of customer information. The profile (contact info, location, preferences), the interactions (channels, products, social, sales offers, marketing), the transactions (billings, payments, IoT, devices), and the relationships (services, products, social relationships, household, business relationships).

In large enterprises, I have seen up to 150 different systems or tools where customer data are stored. Examples are ERP, CRM, E-Mail, HRIS, e-commerce, social media, store-system, Excel, e-mail tools, marketing automation. How does this enable a 360 view of your needs when there are islands of data scattered throughout?

Conclusion

Data management solutions like PIM can deliver the advantages of the platform economy on a no-code or low-code level. These solutions allow businesses that rely on e-commerce to reach new heights by enabling scale & the speed with optimized operational efficiency. They connect products, customers, employees, suppliers, locations, and more – and the more modern solutions are using built-in machine learning and AI to provide even greater connections and advantages.

A brief list on how a master data experience platform (MDxP) connects business-critical information (and what you should look for in your current platform or upcoming investment):

1. Cloud-native SaaS business model: Simple for customers as it includes any updates seamless. This also makes for a more transparent and low TCO.

 

2. The technology core should be made for scale: Future-ready platforms are built on big data tech, use new non-relational databases, use micro-services, and are API driven.

 

3. App platform: The biggest advantage of the platform economy is to be able to react to change. Being able to plan for the unknown future. Previously, this would require mods to the mods and increase overall costs (oftentimes unpredictably and uncontrollably). On low-code or even no-code, you can extend MDxM platforms by building smart add-ons that don’t hamper the future updates to the SaaS. For example, full apps for a certain industry need or specific reporting dashboards or User Interface adoptions.

 

4. Connectivity and integration framework: Business-critical data about customers, products, and other attributes live in different applications and files. The pace of change and the volumes have no boundaries. When speed, validity, and veracity of data is of utmost importance, it’s key to connect data seamlessly to and from any source, in any format, and transform data in order to make them usable for smarter business decisions. The platform must have a strong yet flexible connector framework.

 

5.Machine Learning: Not too long ago, every tech solution claimed to offer some level of AI. Then the world understood it is actually machine learning which helps to make classification and match/merge of master data records like the customer and product data faster for quicker time to market. Furthermore, it helps to reduce errors in data quality. For example, to ensure compliance with regulations like in food or pharma, or just having a shipping address correct to the right customer.

About The Author – Ben Rund

Ben Rund is Riversand’s General Manager in the DACH region and Vice President Business Development, Europe.

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