By Anna Ringstrom

STOCKHOLM, (Reuters) – IKEA retailer Ingka has spent 3 billion euros ($3.2Billion) on existing and new stores. Much of this money is to change its trademark outlets out-of-town so that they double as ecommerce distribution centers.

Tolga Ocu, the retail manager of the IKEA group that owns the majority of IKEA stores around the world, said to Reuters that the money would go across all regions. However, about a third was earmarked for London as a testing ground for new formats and logistic setups.

Oncu explained that the majority of the items will be located in the existing shops, as we are talking about the transformation and redesigning of square metres.

Ingka has been adapting to online shopping over the years by opening smaller shops, redesigning its website, and launching a new mobile app.

Oncu explained, “We think we still have some work to do in the back-end (and) have realized that we can make it win-win by including retailers into our fulfilment design and last mile network.”

He stated that online orders shipped from out-of-town shops’ warehouses will result in faster delivery times and lower carbon emissions than shipping via a handful of logistics centers.

Why not ship it directly from IKEA instead of building central warehouses to store online purchases?

Oncu said that automating warehouse sections of out-of-town shops will help to make a large portion of these investments.

This plan is timely as businesses become more cautious due to increasing inflation, geopolitical tensions and worsening consumer confidence. Oncu stated that the timing of IKEA’s funding by foundations was perfect.

I agree that the outlook for consumer spending is gloomy. This means that consumers are looking for value and efficiency, cost-efficient solutions and affordable options, both functional and durable, and of high quality.

IKEA’s low-priced home furnishings saw record sales during the pandemic. This was because people were spending more time at their homes.

Ingka spent approximately 2.1 million euros on new and existing shops in each of its 32 markets over the three previous fiscal years.

This latest investment will focus also on traditional “blue box” stores opening in Romania, China, India, and New City Stores. It may also include planning studios in Canada and the United States.

($1 = 0.9518 euros)