A featured contribution from Leadership Perspectives: a curated forum reserved for leaders nominated by our subscribers and vetted by the Construction Tech Review Advisory Board.
IKEA China
Leveraging Digitization to Make Homes Better
Kevin Lee
Today, our customers, like the customers of other retailers, live both digital and physical lives. They are not two different customers, but one that goes between online and offline in unpredictable ways. Therefore it is essential to emphasize that digital is not just for online. Offline and online are both important parts of the customer journey, and digital is a crucial ingredient in both.
IKEA wants to be more accessible through the development of online to meet the increasing demand of consumers to IKEA unique product ranges. To do so, IKEA intends to increase surface area by enriching the portfolio of digital touchpoints, such as mobile and web apps, mini programs, and many other places where consumers are. The increased surface area allows IKEA to access more traffic channels to capture demand online.
Nevertheless, let us not forget about physical retail, which is the most intriguing area for digital.
IKEA will focus on increasing digital touchpoints, but getting customers online is hard. Customer acquisition costs (CAC) for brands are rising rapidly year over year, and quality is degrading with scale.
IKEA Aims To Use Digital To Inspire And Encourage Consumers To Build A Better Home And Life; To Help Them Find And Buy Products Easily.
In other words, CAC is the new rent! This is why many online pure players reach the limits of growth online and are building stores offline, not just in China, but everywhere in the world all the same. Physical retail is no longer merely a product distribution strategy—it is also a customer acquisition strategy. With the digitization of IKEA stores, while we can capture many high-value customers into our omnichannel funnel, we cannot replace physical retail.
Following this logic, IKEA aims to use digital to inspire and encourage consumers to build a better home and life; to help them find and buy products easily. We want to fix their pain points from design; to provide a seamless O2O journey; to understand and predict their needs through big data.
IKEA believes that most consumer-facing companies should be technology companies as well. To build more digital solutions both online and offline, IKEA has founded a vertically integrated, full capability digital hub in Shanghai. The role of the Digital Hub is to build the capabilities IKEA needs to service our customers in the present and the future, online and offline. The skills are across these areas: digital products, engineering, UX design, technology infrastructure, data science, and others with over 250 technology employees.
In China, rapid consumer behavior changes require rapid adaptation of business models for retailers. This is an excellent place for IKEA to experiment and explore how to do modern retail. And because China is a frontrunner in digital technology, IKEA will be investing in technical innovations in China market that benefit IKEA customers around the world. IKEA is at the beginning of the retail revolution, and we are very excited to take this journey.
