09 December 2020

Brands like IKEA show how the New Normal for retail may look


Retail is one industry that is certain to change after the Covid-19 pandemic is finally in the rear-view mirror. Many retailers that relied heavily on their physical stores were dramatically impacted during the lockdowns and stay-at-home orders. Even now, changes to footfall because of new commuting patterns means that some are facing an uncertain future.

The New York public transit system is facing a potential cut of over 40% of services. At present, passenger numbers are around a third of the levels experienced before the pandemic. New York has seen a catastrophic drop in tourism, which may account for some of the changes in passenger levels, but there has also been the trend for professionals to work from home and a more general fear of using public transport during the pandemic.

The real question for retail companies is how will consumer behavior change as the vaccines allow a return to something closer to normality. Will shoppers rush back into stores or will some of them change their shopping behavior forever?

If you look at the business magazines like Forbes then the predictions for retail in 2021 include Artificial Intelligence, Big Data, Augmented Reality, Virtual Reality, and contactless technology. It’s a festival of technology. I do believe all these innovations will be important for some retailers, but I believe there is a bigger question that will define how consumers behave - how does the shopping experience feel?

This has always been important for brands like IKEA. When people shop for furniture they usually want to actually see what it looks like in-person. Visiting an IKEA store is always more of an experience than just shopping for groceries because you get inspired by the displays, the store is always full of ideas, and they have all those quirky Swedish extras - like meatballs. It’s even possible to recreate your favorite TV show with IKEA furniture.

IKEA does also use some really innovative technology - it’s not just about the in-store experience. Tools like the IKEA Place app allow you to see how furniture looks in your own home before making a purchase. It’s a really simple and fun way to use technology like Augmented Reality and let’s face it, some of the time these tools are great ideas looking for a problem to solve. IKEA has made AR useful.

This is where I think the real changes will take place. No retailer should now be relying 100% on their physical stores because it may still take many months until we are completely past Covid-19 and who knows when another major challenge might arrive. In fact, Walmart has proven that their best shoppers are the ones that use both in-store and online channels - these flexible shoppers spend 50% more than those who only shop online or in-store. Rather than just rolling out endless technology projects, I think retailers need to be thinking of these actions for early 2021:

  • Use tech to improve the customer experience. If you are rolling out an Artificial Intelligence system then what is it directly offering the customer? Don’t assume that change and innovation come from the technology itself.
  • A compelling offer online and offline. As Walmart demonstrated, most shoppers are no longer just one or the other, they want to choose. Allow customers to move easily between your online world and the stores.
  • Flexibility in channels. As the IKEA Place app demonstrates, you can offer tools that help guide decision-making and then lead to an in-store sale. IKEA knows that over 80% of their customer journeys start online, regardless of where the final sale takes place. Car dealers have noticed this for several years now - customers have already done the research - they just want to buy the item.
  • Flexibility in processes: as you start blending online sales and services such as click and collect, can the store network also focus on fulfillment, rather than just being a showroom? How can your existing network fit closer to what customers need?
  • Connecting channels. Create more insight by connecting the in-store and online experience. By knowing who is shopping can you offer new services that directly impact on the experience - like no-line checkouts or real-time offers?

About three years ago the Nasdaq stock market published some retail research suggesting that the path from traditional retail to e-commerce was inevitable. In fact, they suggested that in the British market 95% of all retail would be online by 2040. That sounds very high, but suggests that maybe the only retail that will not be online in future will be convenience items (things you need right now) or experiential.

Brands like IKEA are demonstrating an awareness of these trends. In Chicago they are even helping animal shelters re-home dogs and cats by including life-size animal pictures in-store.  It’s this awareness of the in-store customer experience and the support that online channels offer that will make a big difference in the years ahead.

Let me know what you think about retail in 2021 and how brands like IKEA might face up to the changes across all retail? Leave a comment here or get in touch via my profile here.


Peter Tetlow, Head of Solutions and Bid Management