IKEA to create ‘mini distribution centers’ in its own stores

With its endless rows of shelving units, stacked cardboard packaging meters high and sober design, the self-service warehouse in the stores of the IKEA store chain looks a lot like a distribution center. Where in the showroom all attention is focused on atmosphere and decoration, the last space before the exit is mainly practical. Quickly collect the right products, pay and go home.

According to Tolga Öncü, operational director at the umbrella organization Ingka Group, it was therefore not a very big step to actually give the warehouses of the Swedish department store that function. IKEA announced Monday that it will renovate a large part of its stores in the coming period. Besides as a place to receive and inspire customers, the chain wants to use them to deliver online orders quickly to the front door.

Until now, IKEA (37.4 billion euros in turnover, 135,000 employees) only sends orders from customers who shop at home from specially equipped distribution centers (DCs). But now that consumers are rapidly moving to the internet, especially since the corona pandemic, the store has started thinking about other solutions. Öncü told Reuters news agency† “Why build new DCs for online purchases when we can ship them from IKEA stores too?”

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3 billion euros

The company is allocating a total of 3 billion euros for this year and next to tackle its stores, a large part of which is intended to convert parts of branches into mini DCs. According to the operational director, 30 to 40 percent of all roughly 460 stores will have such a ‘double role’. This will be at the expense of the retail space: the surface area of ​​the branches in question will in many cases remain the same.

Shipping directly from the store has several advantages, according to Öncü. To start with, the journeys from storage to customer are shorter, which, according to Ingka’s operational director, makes a significant difference in emissions. In addition, IKEA can deliver so much faster and cheaper. In a shop in Kuopio, Finland, a trial run has recently been conducted: the delivery time has been halved and the delivery costs have been reduced by 40 percent.

IKEA is not the only retail chain that uses its branches as a logistics center. The Spanish clothing giant Inditex (including Zara, Bershka, Pull & Bear) and the American department store chain Target have been doing it for several years. In the Netherlands, household store Blokker started shipping directly from the stores last year, in collaboration with a super-fast courier service.

IKEA also uses part of the 3 billion euros to experiment with other types of stores. For a few years now, the store has also focused on city shops in larger cities such as Paris, Dubai and Vienna, with a much more limited range than in the blue-and-yellow megahalls outside the city center.

More than a billion of the budget will be used for a large-scale project in the British capital London. There IKEA will open its first department store in the middle of the city sometime next year, in the well-known and luxurious Oxford Street. That should become a “testing ground” for new store concepts, the Swedish company announced earlier.

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