In anticipation of urban population growth, Sweden's largest furniture and home goods retailer, IKEA, will open smaller stores and pick-up points closer to city centers. IKEA CEO Peter Agnefiel spoke about this in The Wall Street Journal (WSJ).

“Until now, our recipe for success has been to build fairly large stores in potato fields. But we expect 70% of the world's population to live in cities by 2050,” Agnefjell explained. “There aren’t many potato fields in central London, so we obviously need to do something to keep IKEA [stores] accessible.”

Thus, IKEA is working on a project in Copenhagen: in addition to the store, it involves the construction of a hotel, residential and commercial real estate, Agnefjell said. Such properties "will allow [the company] to buy pieces of land that are typically quite expensive and still keep prices low," he says. Now the company already has 66 shopping centers and retail parks in 15 countries.

IKEA is trying to stock more and more products closer to consumers to make delivery faster and cheaper. “The stores will be the center of our activities in the future,” says Agnefjell. Many stores can operate as a pick-up point for online orders. Currently, IKEA receives 95% of its revenue from traditional offline retail.

Russian growth

IKEA sales growth in Russia for the financial year ending in August 2016 was 1%. The group did not disclose the indicator in monetary terms. During the year, IKEA stores in Russia were visited by 70 million people

For the financial year ending in August 2016, the retailer opened 12 new stores in this format and 19 order pick-up points, the Financial Times cites company reporting. During the reporting period, IKEA's net profit increased by 20% to 4.2 billion euros, with revenue growing by 7.4% to a record 35.1 billion euros. Sales rose in 27 of its 28 markets, with growth of 14% in its two largest markets, Germany and the United States. At the same time, according to Agnefjell, in the coming years the number of products supplied to customers directly, rather than through stores, will increase 5 times: “This is a challenge for us.”

To prepare for this, IKEA has created two automated order processing centers in Germany and the UK - they are designed specifically for sending goods directly to the consumer. The company is also launching new multifunctional distribution centers that will be able to handle both direct deliveries to customers and deliveries to stores.

IKEA is leaving the field