IKEA is working with streetwear labels, inventing new foods and moving onto third-party e-commerce. Will it be a better IKEA?

Cooperation, learning and innovation were the three words heard most often at this year's IKEA Democratic Design Days.

From June 7 to 8, 250 journalists and bloggers from 28 countries squeezed into IKEA of Sweden, the company's headquarters building in the small southern Swedish town of Älmhult. They had two days to see the products IKEA plans to launch over the coming year, interview its top executives, and learn more about how the company runs itself.

The event, called IKEA Democratic Design Days, has been held for three years. But in 2017, for the first time, it dressed itself up as an Apple developers conference.

That day, IKEA's website streamed the event live for the first time, the way Apple's does. Jesper Brodin, who takes over as CEO in September, opened the proceedings. Eleven collaborating designers were invited on stage, among them well-known industrial designers such as Tom Dixon and Piet Hein Eek — and quite a few people with no obvious connection to furniture or home goods: Virgil Abloh, founder of the streetwear label Off-White; Bea Akerlund, the American stylist behind Lady Gaga's looks; Ben Gorhem, founder of the niche fragrance brand Byredo; NASA scientist Constance Adams; and the electronic music group Teenage Engineering.

The "ongoing projects" exhibition on the second floor of the venue was curated mainly by New Business & Innovation, a department set up two years ago inside Inter IKEA Group — the one of IKEA's two branch groups that handles brand operations. The show covered Easy Assembly, Smart Home and other themes, and the theme wall read: "Working with innovation labs, universities, markets and startups to find product inspiration together."

Johanna Svensson, the department's Open Cooperation Manager, told QDaily: "We're essentially IKEA's in-house research institute. The goal of working with all these third parties isn't necessarily to turn things into products — exploring a concept or starting more discussion is fine too."

Jesper Brodin put it to QDaily this way: "I do think IKEA needs to become a technology company, but not the geeky kind that focuses on electronic devices. Everything should still revolve around the needs of the home. But we need to open our minds, explore new areas beyond design, and open up IKEA's resources and supply chain so we can use outside strength to try new things."

On June 8, IKEA announced that it will sell furniture on third-party e-commerce platforms. That opens a breach in a company whose brand rests on selling "solutions for the home" — furniture taken out of IKEA's stores and showrooms may lose that particular "IKEA magic," the feeling that used to make people wandering an IKEA store think, "it's good to have a home."

At the same time, IKEA is adding collaborations with outside designers, trendsetters and technologists in bulk — the very people who spoke at the event. In the past it usually released one or two limited design collections a year; in its fiscal 2014 annual report, it said it would release at least ten. In some IKEA stores, these limited products, which are never stocked in quantity, now get the most prominent spots.

"Working with well-known designers isn't about vanity or marketing. It's simply to bring a little energy to product development, and to give our own designers more inspiration and confidence," IKEA creative director Karin Gustavsson explains in the Democratic Design Days Handbook handed out at the event.

IKEA employs only 16 designers on long-term contracts worldwide; most of its products come out of project-based collaborations. Motivating those designers is certainly not the only reason for these changes. Look at IKEA's net revenue and gross profit from 2009 to 2016 and you'll see growth slowing from 2012 on — net revenue grew just 3.6% and 0.4% in the two years that followed. In 2016, group sales growth slowed to 7.1% year on year, and half of that came from new stores. But to meet the plan it announced earlier, €50 billion in sales by 2020, IKEA needs to keep sales growing by an average of 10% a year.

On May 25, Jesper Brodin, 48, who previously ran IKEA's products and supply chain, became the sixth CEO in the company's 74-year history. Some media speculated that part of the reason was that sales growth under Peter Agnefjall had failed to reach the expected 10%.

For a company with 74 years of history, 397 stores worldwide, a presence in 48 markets and 915 million customer visits a year, what kind of reform can actually work?

Apart from the products confirmed for launch, almost nothing you asked about on site got an answer that was 100% certain. The entrance and the back of the audience seating were dressed as lit temporary display stands, to show that "everything is still in progress." And outside the white building known as the IKEA Democratic Design Center hung a banner reading "House of Curiosity" — words that bring a startup to mind more readily than IKEA.

Cooperation, cooperation, cooperation

"Look, doesn't this sofa bed look like an iPhone? On iOS, people can create any new app they want, and this sofa bed is only the beginning — everyone's own modifications make it different," said British industrial designer Tom Dixon.

Dozens of sofa beds were scattered around the venue as seating, each with a price tag hanging from it. They are Tom Dixon's newest product with IKEA, due out in 2018. This past January, the Wall Street Journal had already reported on this "open-source sofa" — it invites people to start from a single sofa cushion and add armrests, a side table, a child's rocking chair, even a floor lamp, to build a sofa that suits their own habits; prices run from $399 to $899 depending on which parts you add.

To show what the "open-source sofa" can do, IKEA also brought in 75 people — from London's Royal College of Art, New York's Parsons School of Design and outside design studios — to build all kinds of new versions from it.

The same idea came from Issa Diabate, an architect from Côte d'Ivoire. This year he and 11 other African designers and artists were invited by IKEA to design a collection called Overallt. Diabate says he plans to make two products: modular architecture that ordinary consumers can download plans for and assemble with whatever materials they have to hand, and movable plywood furniture that users can turn into a chair or a table themselves.

Bringing more people into the work was the phrase everyone reached for most. That means not only cross-disciplinary designers but consumers. Creative director Marcus Engman's view: "IKEA doesn't have retail outlets in Africa yet. Maybe this approach can help us expand our retail business there."

One problem IKEA has always faced in design is how to meet people's demand for personalized design while still guaranteeing mass production, and reach as many people as possible.

In past years, cross-disciplinary collaboration was the most common answer, but IKEA opened up very little, mostly in prints and materials — the French fashion designers Pınar Demirdağ and Viola Renate, who worked with IKEA last year, were responsible only for prints. The Stockholm design firm Claesson Koivisto Rune has even said it would not consider working with IKEA, because "the changes IKEA is willing to make may stay on the surface."

IKEA has also been overly careful about whom it chooses to work with. Most of the time, these collaborating designers struck a chord with design obsessives or fashion obsessives, but to ordinary people they were just a name.

This year, IKEA's story changed. Henrik Most, one of IKEA's creative directors, brought in Virgil Abloh — founder of the streetwear label Off-White and Kanye West's stylist — and Chris Stamp, founder of the streetwear label Stampd. They have 761,000 and 97,000 followers on Instagram respectively.

"It would have been too boring to have Virgil and Stamp design prints for IKEA," Henrik told QDaily. Stamp ended up making a skateboard printed with a marble pattern, the first skateboard IKEA has ever sold. Henrik Most said their theme this time was "a young person's first home," and that "a skateboard expresses the more relaxed, freer way young people see the home."

These changes have given Bjorn Block, head of IKEA's purchasing department, plenty of trouble. The two forms of crossover — limited collections made with people from other fields, and open-source designs that leave consumers more room to do it themselves — set the supply chain completely different problems.

"The first is how to keep prices down while producing in small batches; the second is what new materials to look for and what kind of production line to set up so that all kinds of parts can be combined sensibly," Bjorn Block told QDaily. "Generally these collections cost 50% more than regular products."

Jesper Brodin admitted this is a new problem for IKEA. "The hardest part is forecasting production volume. We've messed that up before. Solving it means getting consumer data faster and more accurately. Right now we adjust based on feedback from IKEA Family members, but we'll need other kinds of innovation going forward."

The smart home is a crossover of another kind. This March, IKEA launched a wireless smart home light called Trådfri. On May 23, it announced that the smart lighting kit will work this year with the main voice assistant devices — Amazon Alexa, Apple HomeKit and Google Assistant — folding its own products into the three big smart home platforms.

Home Smart also sits under New Business & Innovation. Its head, Björn Block, told QDaily they started with lights because "IKEA sold 79 million LED bulbs in 2016 — it's a product IKEA already runs fairly maturely." He would not give sales figures, saying only that "eight weeks in, sales are far better than expected."

What surprised him a little: to look after "consumers who aren't so keen on phone apps," IKEA put a remote control for the bulbs in the $80 smart home kit — but "most buyers still chose to download the app."

Food will become a standalone business unit, like IKEA's home furnishings

The job of Bjorn Block, head of IKEA's purchasing department, has shifted a bit lately. For more than a decade he ran supply chain management and purchasing for IKEA's home furnishings. This April he also took on purchasing for IKEA Food, because "food is going from an ancillary customer-service business to a business unit on a par with home furnishings." The existing logistics and supply departments won't change, but food will get its own product development department, with purchasing as part of that development work.

"You could say everything is getting more complicated, because everyone's job is gaining new dimensions," Bjorn Block told QDaily.

IKEA's restaurant business dates to 1959, and was meant at first only to send hungry customers away happy, with a taste of Sweden on the side. It has since grown into three parts — the restaurant, the Bistro and the Swedish Food Market — serving an average of 650 million visits a year. Last year IKEA's restaurants took in $1.7 billion, close to 5% of the group's $37.4 billion in global revenue, and about what Domino's, the second-largest pizza chain in the US, made in 2013. In China, IKEA restaurant sales reached 1 billion yuan as early as fiscal 2015, nearly 10% of IKEA China's total revenue.

Fast Company had reported that "IKEA restaurants may grow into standalone small restaurants, opened specifically in city centers," but Ylva Magnusson, head of PR for IKEA Food, told QDaily that this was simply wrong.

"There's no final conclusion on whether to open standalone restaurants, but we do plan to open restaurants in more and more IKEA pick-up points (PUPs)."

David Johansson is a chef in IKEA's food design and development department. The department has only two chefs, and between them they handle the 50% of the menu at IKEA restaurants worldwide that is "Swedish flavor"; the other 50%, local food, is left to local teams.

David feels his own work hasn't changed much as IKEA's food business has grown — only that "there's more attention from outside, so there's more pressure." "Our overall direction on food innovation hasn't changed: make eating healthier, more sustainable and cheaper." For David that means talking more with Swedish farmers and using the cucumbers and carrots that get thrown away for not looking good enough, cutting waste and cost at once, or teaching consumers to make their own pickles at home.

But the frameworks he has to fit into, and the people he has to work with, are multiplying. In a brochure that Ylva Magnusson, head of PR for IKEA Food, showed us, food design — like furniture — now has its own definition under the five principles of "democratic design." The 2017 IKEA PS limited collection included food as well as furniture: because the theme was "modern living," David designed instant drinks, mixed spice packets and mixed grain packets, to suit "young people's need for speed and convenience."

Some new organizations have become David's reference points. Outside the company, that organization is Space 10, a company founded in 2014 by the Danish design studio Rebel Agency together with IKEA; IKEA provides the space and the salaries of four employees. Its stated goal is to research frontier fields, and it has set up four labs — The Farm, Do You Speak Human, Possible Cities and Build with Spaces, covering food, artificial intelligence, urban planning and digital construction — but CEO Carla Cammilla Hjort told QDaily their focus is still food: how to develop more Swedish meatballs that are cheaper and healthier, for instance, and how to build an indoor farm an ordinary person can run.

Inside the company, that organization is Co-Create, one of the sub-departments of Inter IKEA Group's new New Business & Innovation department. Last year Mikael Ydholm, who was busy curating at the IKEA event as head of Research in Life at Home, moved over to run this new department.

In Mikael's own words, he has "switched from front-end consumer research to back-end product development." The difference is that this department will work much more closely with all sorts of third parties. On May 18 they announced a program called IKEA Bootcamp, recruiting 10 startups to research seven areas including food innovation; more than 200 applications have come in so far. By the end of January 2018 they also plan to open the online forum at co-createIKEA.com to some of IKEA's 160 million IKEA Family members, letting consumers join discussions about product design — food included, of course. Social platforms are off the table for now, because Mikael wants to "bring people in step by step, rather than doing it for the sake of doing it."

Inviting consumers into design is hardly new. If you remember, Muji was already collecting customer ideas online for a bedside light back in 2001, then offering several designs and letting customers vote on the final one.

So why is IKEA only starting now? "Ten years ago I'd have found it hard to imagine IKEA opening its doors the way it has today, but now I think it's ready," said Mikael Ydholm.

IKEA is finally expanding e-commerce — but with third parties

IKEA's e-commerce has reached only 14 markets so far, close to 30% of the markets it operates in. Because it hasn't spread far, its showing in the company's financial reports is mixed: e-commerce grew 30%, the website drew 2.1 billion visits, and the catalog and IKEA app drew 110 million — but sales came to just €1.4 billion, only 4% of total sales.

Meanwhile the home furnishings e-commerce pie keeps getting bigger. According to IBISWorld, 15% of the furniture market, now worth $70 billion, comes from e-commerce. Wayfair, the largest furniture e-commerce company in the US, grew its revenue from $916 million in 2013 to $3.38 billion last year.

Moving slowly doesn't mean IKEA takes e-commerce lightly. Karen Pflug, IKEA's global head of quality control, told QDaily that they picked 9 of their 14 e-commerce markets and turned on rating and review functions like those on the travel site TripAdvisor, and found this much faster than collecting user feedback forms in physical stores. The results are fairly satisfying too — the average rating across the 9 markets is 4.4 out of 5, and 95% of the reviews are positive.

As for why e-commerce has taken so long, outgoing CEO Peter Agnefjall told QDaily last year: "We have to look after our existing stores and our existing customers, and only on top of that do we discuss expansion. That's the philosophy we've always held — start from what we have, always secure that first, then do something new."

Jesper Brodin, the incoming CEO, gave much the same answer to QDaily this time. "A multi-channel strategy has always been our focus, but we've also always believed that home furnishings are different from fashion or electronics — people still need stores to get a better feel for the product."

IKEA's pick-up points (PUPs) are one way to strike a balance in its multi-channel retail plan. They go up fast, cost little, show results quickly and turn capital over quickly. IKEA China told QDaily that its future e-commerce plans will move further away from the stores, with customer distribution centers (CDCs) taking orders directly and delivering to the home. That department sits under IKEA's distribution center (DC) in Shanghai's Fengxian district — IKEA's only distribution center in the Asia-Pacific region — which is preparing the work tied to multi-channel retail.

But the fact is, IKEA is finally rolling out its own e-commerce network. According to CNBC, besides its own website, IKEA plans to sell furniture on third-party sites next year. Torbjorn Loof, CEO of Inter IKEA Group, who disclosed the news, did not say which e-commerce site it would work with, and declined a further interview with QDaily.

One thing that complicates matters is that different markets run their own local e-commerce strategies. According to information IKEA China gave QDaily, e-commerce is currently in trial operation only in the Shanghai area; if the business expands nationwide, IKEA will need to apply for a value-added services business license. China is the first country in Asia-Pacific where IKEA has started e-commerce, and the e-commerce team is for now a project team responsible for carrying the project out and preparing for the future transition into a multi-channel retailer.

The Baoshan store in Shanghai currently operates IKEA's e-commerce business — meaning that after you place an order on IKEA's e-commerce site, the Baoshan store takes the order and delivers it to your home. Roughly 7,000 products are online, against more than 9,000 in the Baoshan store. Product management for the e-commerce business is handled by the service office on Caoxi Road in Shanghai's Xuhui district (also IKEA China's headquarters), with support from other departments, such as the customer service center in Wuxi.

IKEA is fairly satisfied with the trial so far, saying it has hit its expected sales targets, though it didn't disclose the figures. It said the main use of e-commerce is to understand customers' online shopping behavior better. "In China, cooperation with third-party platforms will depend on IKEA's global development strategy and on whether IKEA China's development plans fit with it. There are no plans at the moment."

At the "Design for the Future" breakout session of Democratic Design Days on June 7, Torbjorn Loof also stressed how important e-commerce platforms are. In his words, "IKEA's three future goals are to let more people who can't afford IKEA afford it, to have a positive impact on people, society and the environment, and to reach as many people as possible." As for how to reach more people, in terms of sales channels it means "using all kinds of digital platforms, even AR."

They have in fact already signed an agreement with Apple, and expect to launch IKEA's own iPad AR app on Apple's AR development platform this October. Chang Choo, head of the R&D team at New Business & Innovation, demonstrated on site how to use it to see how an IKEA product would actually sit in your home, showing price, fabric, color matching and other details, then tap to buy, or share an AR video or image to social media. He told QDaily: "This all happened in a matter of weeks."

To speed up its reactions, IKEA has also reorganized itself considerably. Khai-Mang Quach, 26, was a 3D artist in IKEA's product marketing department, making the catalog. A year and a half ago he was moved to the Digital Product Development platform under the new New Business & Innovation department, where he works with Johan Ejdemo, a decade-plus IKEA veteran, on a visual digital system that lets people in every department work faster. In it, product developers, materials developers and buyers can see simulations of how different product combinations look in a room, and see in real time what adjustments other departments have made.

Johan Ejdemo told QDaily that the system can cut development time for a single product from three or four months to three or four weeks.

"I don't know whether any other home furnishings company is doing this, but at the very least IKEA is much faster than it used to be, and this is only the beginning."

Cover image and photos from IKEA's website.