Amazon and Jeff Bezos's earth-shifting influence continues, forcing a wider and wider range of companies to reconcile their reality with the one the Seattle stalwart is creating. Count Ikea among those making a 2018 decision to shatter the status quo in the midst of declining sales and, according to Ikea CEO Jesper Brodin, to "change everything, almost."
That shift brought big changes that fellow columnist Bill Murphy Jr. wrote about this past summer--like plans to launch stores in urban locations, changes to store layouts, and bigger investments in store-to-home delivery.
Now, the furniture mammoth has made it clear that they're even changing their business model, in response to the battering ram that is Amazon. They brought on Barbara Martin Coppola as chief digital officer to design and deliver the overhaul. Martin Coppola laid out the company's ambitious plans in an interview with CNBC yesterday.
The plan for competing with Amazon offers much that any company of any size can learn from:
1. Let's get "phygital, phygital."
Olivia Newton-John might cry foul, but Martin Coppola branded a new term for delivering the values and feeling of Ikea via a blend of physical stores and a digital presence: "phygital". Note this isn't just selling in-store and online--10 percent of Ikea's sales already come from online. It's about carrying the magical experience of an Ikea in-store visit and transporting and enhancing it online.
Case in point, the company now plans to launch Place, an augmented-reality app that allows customers to visualize how a piece of furniture would look in their home (while giving personalized recommendations).
I have seen far too many brands slap up a digital storefront as an add-on to their physical outlets and think the job is done. The key here is to build on the strengths of the "base" experience and leverage digital not just as an extra location but as an experience enhancer.
The upside is enormous--while Amazon may seem daunting in the online world, the phygital world is still very much undefined.
2. Amazon is a goalpost, not Goliath.
There's a spirit about the new Ikea approach that I really like, captured by Martin Coppola in this quote:
I think the innovation, customer focus, and who's going to be serving the customer better in a magical, convenient way is still up there. So yes, I think do not underestimate the players such as Amazon but I think there's a lot to invent and innovate that has not been done before.
In other words, whoever the behemoth is in your industry, be inspired by their innovation, not intimidated. Whether it's Amazon or another company, think of them as setting the goalpost to aim for, not a mythical giant you have no hopes of slaying. Innovation and creativity can be led by anyone paying close attention to consumer needs.
3. Know thy consumer, grow thy consumer.
Related to point No. 2 above, Ikea plans to fully harness all the information they gather to better tailor and personalize their offerings. For example, they're investing in "personalization-at-scale" by sending super-targeted communications to potential customers based on what they've learned about them online.
As Martin Coppola said (edited for brevity), "When people buy a bed, they spend two weeks researching online. So there's a lot of information we gather that we can use to be relevant to that person at that time."
If you don't have the IT wherewithal to have complex data gathering systems, not to worry. Nothing prevents any business owner from simply spending more time with their end user to a) figure out what they really want, b) be more informed of how to be relevant, and c) give it them. It's about harnessing and acting on the knowledge you're able to glean--even if it's not stored on a giant mainframe in a temperature-controlled room.
4. Speed test.
Coppola calls it "entrepreneurship in an organized way." She has a background working for the likes of Google, YouTube, Texas Instruments, and Samsung, and has lived the importance of testing quickly, iterating, and re-testing. I too have worked with Google, YouTube, and even Facebook, which epitomizes speed learning. Facebook has immortalized this strategy with posters that hang around their campus emblazoned with the motto "Move fast and break things".
My experience with rapid iteration shows the key is to be brave in ideation, resist the temptation to only test the "perfect product" (instead adopting a minimum viable mindset), set up a process that frees you from bureaucracy, and then let the consumer (reactions to the test) guide you--not your own biases.
I don't have numbers to report yet on Ikea's plans. But the approach is sound and offers much to learn from. I'm curious to see if Wall Street agrees, and if you do. Let me know.