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THE BACKGROUND

IKEA. There is no other furniture brand as iconic as the blue and yellow giant famous for its ready-to-assemble flat-pack furniture, dizzying warehouse stores,  and difficult to pronounce product names (GRÖNKULLAFYRKANTIG).

The Swedish giant claims its beginning started in 1926 when founder Ingvar Kamprad was born but it was only at the tender age of 17 when he started a mail order business selling pens, watches, jewelry, and picture frames after receiving seed money from his father.

Furniture would be introduced into the company’s product offering five years later and become a success.

IKEA ecommerce

Ingvar Kamprad, the founder and senior adviser of IKEA, is the world’s 10th richest man. Source: Aftonbladet

Six decades later, IKEA’s 300+ stores around the world require over 1%of the global supply of wood to make over 100 million pieces of furniture. No business can come close to the Swedish conglomerate’s size…right?

THE CHALLENGE

While no furniture business has been able to even remotely achieve the same brand identity and global scale that IKEA has in the last 60+ years, the world’s shift to ecommerce has forced the company to re-think its retail strategy.

The biggest threat comes from low-cost manufacturers going direct to consumer by following a “Warby Parker business model”, popular examples include Interior Define and Bryght in the US.

“By cutting out high-rent showrooms and warehouses, big-budget ad campaigns and big-name designer, these companies can offer great prices and bring in greater profits.” – NYT

“This year has been quite challenging in terms of sales. After many years of good sales, this year we have seen weaker launches, stiffer low-price competition and changing consumer behavior. We are revising sales targets downward for the year, but remain very optimistic and ambitious,” Jesper Brodin, IKEA CEO, then MD, told a global suppliers’ conference in Almhult earlier this year.

“People are making choices in different ways. Retail is getting tougher, and there is a bigger fight for the marketplace than ever before. We need to be much more aggressive and the price-volume equation, which is part of IKEA’s DNA will help us.”

With the success of ecommerce companies like Amazon making headlines everyday, IKEA, along with every other retailer in the world is being reminded that retail is evolving and the traditional company finds itself having to learn new tricks.

THE STRATEGY

While late to the online shopping scene, up until 2016, the company was officially present in 28 countries and offered ecommerce in 14 of them. Even with no new ecommerce ventures in 2016,

IKEA recorded at 30% jump in online sales to $1.6 billion, a small fraction of total sales but nonetheless impressive.

“We weren’t one of the early adopters but we’ve matured in our thinking about it,” Peter Agnefjall, former IKEA CEO told the New York Times. “We realised this is not a trend, it’s a megashift.”

The company has never been one to shy away from innovation. Its successes include its in-store cafeteria and very own startup incubatorfocused on food innovation, disruptive technologies, customer experience, disruptive design, sustainability, manufacturing, supply chain, and analytics.

It’s not then surprising to learn that IKEA has become one of the first to actually incorporate VR into its brand new mobile app launched only yesterday.

IKEA Place is part of the first wave of augmented reality apps that work with Apple’s new ARKit technology and iOS 11 to allow customers to “place” furniture in their apartments. While late to the show, the company has managed to outpace other pure players.

IKEA ecommerce

IKEA Place uses VR to allow users to easily visual what a piece of furniture will look like in their homes. Source: IKEA

Its push into applications could be attributed to world’s growing affinity for the mobile phone and by analyzing its own customer behavior. In Australia, the company’s website pulls in 40 million visits per year – 50% of which comes from mobile.

At this point in time, IKEA sells its products only on its own websites but has dabbled in the idea of establishing an official presence on Amazon but no confirmation has been made by the company yet.

There has however, been a partnership between IKEA’s “smart light bulbs” and Amazon’s virtual assistant device Echo to promote the latter’s line of smart home products. Owners of IKEA’s voice controlled light bulbs will be able to adjust the brightness of the bulbs through voice command by not only Alexa but Google and Apple’s Siri as well.

IKEA ecommerce

IKEA Smart Light Bulbs controlled by voice command.

“Unlike other companies, IKEA doesn’t fear the cannibalization of offline channels by online channels.

This is not without precedent, IKEA’s UK online store becoming the region’s largest outlet, without absorbing sales from existing stores.

“It’s just one among our many initiatives to make our products available for as many people as possible. And we are seeing big opportunities by leveraging upcoming digital technologies to their fullest,” said Inter IKEA Group Chief Executive Torbjörn Lööf.

THE FUTURE

IKEA Group is aiming for 50 billion euros in sales for 2020 and to open 18 new stores by end of year. It also has been eyeing growth opportunities in India and Southeast Asia but execution has taken much longer in these emerging markets.

As a fully independently owned company, IKEA must ensure that an average of 30% of the production value of sold goods should be sourced from within India, and within five years of the initial investment. As ecommerce is new to the Scandinavian company, it must test various fulfillment models including pickup points, third-party depots and the use of small-format stores for click and collect.

But the company hasn’t stopped making strides towards its aggressive target and continues to invest heavily in ecommerce. IKEA recently announced that a shoppable IKEA webstore would go live in Singaporein two weeks and in Malaysia in 2018.

IKEA ecommerce

Jesper Brodin, IKEA CEO. Source: dagensps.se

New IKEA CEO Jesper Brodin, who recently succeeded Agnefjall in May this year, will focus on building multi-channel retailing in almost all of its markets before 2017 finishes. He definitely has a tough job ahead moving the giant forward.

But according to Agnefjall, the CEO job involves “working 365 days a year, 15 to 16 hours per day”, which explains the admirable dedication founder Ingvar Kamprad still has for the company.

“Oh, I have so much work to do and no time to die,” he said.

Amen to that.

Here’s what you should know:

1. Grab starts full operations in Myanmar

After four-month trial period, Grab has begun full operations in Myanmar by launching localised apps with new safety and technology features.

Myanmar is the seventh market for Grab where it already has 5,000 drivers registered in its Myanmar’s network. The drivers is said to have seen 30% growth in their average income during the trial period.

Grab is also rolling out GrabVenue terminals at major shopping malls in Yangon that will allow customers without a smartphone to access the service.

The company claimed to have more than 1.1 million drivers in 65 cities across the seven countries and has recently raised $2 billion to strengthen its operations in Southeast Asia.

Read the full story here.

2. Malaysia’s parliament passed two bills legalizing e-hailing services 

Malaysia’s parliament passed two bills that will legalize the e-hailing services like Grab and Uber in the country.

The amendments will allow the services to operate on an “intermediation business license”, a new category specific for the service.

The new license will regulate “the business of facilitating arrangements, bookings or transactions of an e-hailing vehicle whether for any valuable consideration or money’s worth or otherwise”, according to Malaysia’s Land Public Transport Act and the Commercial Vehicles Licensing Board (CVLB) bill.

The bill is supported by the cabinet even as taxi driver associations protested. The CVLB had previously declared that both Uber and Grab drivers were operating illegally in the country.

Read the full story here.

3. Amazon’s entry into Singapore marred by delivery problem

The company is unable to deliver goods to customers in Singapore after introducing its Prime Now two-hour delivery service in the state-country.

As of Friday afternoon, its Prime Now app was telling users that “delivery is currently sold out. Check back soon.” The service appeared to go down hours after its official launch on Thursday, according to media reports.

The company launched Prime Now app for customers in Singapore where they can shop and get tens of thousands of items delivered to their door with free delivery on orders of more than S$40 ($29). The service is available for trial for free for a limited time in Singapore, before the company rolls out its Prime membership program.

Read the full story here.

Here’s what you should know today:

1. Indonesia’s Fabelio is seeking investors for series B

Online furniture markeplace Fabelio is reportedly in talks with potential investors to finalise its Series B funding, the company is likely to raise more than $5 million with participations from existing investors.

Previously, the Jakarta-based company has raised $2 million in series A round led by Venturra Capital. Its seed round investors 500 Startups and IMJ Investment Partners also participated.

Founded in 2014, the company has grown 11x in the last 18 months and reached 1 million page views for the first time last Ramadan. The company is planning the expansion to other Southeast Asia markets.

Read the full story here

2. Amazon Launches Shoppable Feed Stories on Its App 

Never a day goes by without something new from Amazon! Today the company is launching a new feature aimed at improving product discovery, and seemingly inspired by Instagram, called Amazon Spark.

The goal with the new program is to shift some of the social activity around products taking place off-site back to Amazon.

In addition to lifestyle imagery, Spark posts can also contain product photos, text, links or polls. The ability to shop the photos on Amazon’s site is also seemly to be a much more seamless experience than on Instagram.

Amazon Spark is currently only available on Amazon iOS app for its customer in the US.

Read the full story here

3. Jack Ma praises Malaysia on its digital projects implementation

Jack Ma has praised Malaysia’s strength, tenacity and speed in implementing digital projects. The Alibaba Group founder said what he thought was “impossible” for Malaysia to do, Malaysia came through.

The project in question is to make the country the first e-WTP (World Trade Platform) hub in the region, something that Malaysian Prime Minister Datuk Seri Najib Tun Razak promised to do in three months.

“We thought it was almost impossible to make that happen in three months. It was a huge project, but they made it on time. They set up a great, strong team to follow up on the project. They opened up a customs office, inspection offices and made available the land that was required.” said Ma.

Read the full story here

Here’s what you should know today:

1. Omni-channel customers tend to spend more in store

The latest Customer Satisfaction Index of Singapore (CSISG) for retail sector have revealed the benefit of providing online shopping services on top of the in-store experience as department stores offering digital platforms recorded higher customer satisfaction, loyalty, and average spend.

Released by the Institute of Service Excellence (ISE) at Singapore Management University, the research also found that customers with exposures on both platforms showed higher satisfaction than the one who only shopped in-store, showing the digital platforms could be a complementary presence to brick and mortar.

The retail sector scored 72.1 points on a scale of 0 to 100 for the first quarter of CSISG 2017 with fashion and apparel sub-sector recorded the highest increase of point to 72.4 point – 0.90 more than last year on the same period.

Read the full story here.

2. Qoo10 Singapore signed MoU to help SMEs getting a digital boost

Singapore’s branch of Japanese marketplace, Qoo10, has signed a Memorandum of Understanding (MoU) with Nanyang Polytechnic’s (NYP) to help SMEs maximise their opportunity in modern online marketplace.

The program will support local companies with the resources through a series of training workshops, which will cover operational and marketing aspects of ecommerce. The audience will consists of both current merchants in the marketplace, as well as local SMEs want to jumpstart their online business.

As a part of the MoU, students from NYP will also have a chance to do internships at Qoo10.

“Students emerge with wider perspectives of how their skills can be applied, they will be able to offer a multidisciplinary perspective. These students will thrive in this rapidly-changing economy,” commented Jeanne Liew, NYP Principal & CEO

Read the full story here.

3. Tencent Holdings targets Malaysia for local payments via WeChat

Malaysia will soon be the first market outside Mainland China and Hongkong where WeChat offer a local payment service, as Tencent Holdings is applying for license in the country. The reason? Its large Chinese community.

If approved, Malaysian users will be able to link their bank accounts to the service and pay for goods and service using the local currency in ringgit. WeChat can be used at more than 130,000 shops in 13 foreign markets and support 10 currencies.

To expand overseas, they understand the need to have extra layers of regulatory approval, as well as explain the system to local business.

As of now the company has more than 600 million users in its QQ Wallet and WeChat Pay. Meanwhile Alibaba’s Alipay has more than 450 million users.

Read the full story here

Here’s what you should know today.

1. Uber Freight launches to connect truck drivers with available shipments

Uber Freight is a new service from the ride hailing company that pairs up trucking companies, including independent operators with shipments that needs to be hauled from one place to another.

The app is targeted towards vetted and approved truck drivers, who can browse for nearby available loads, see the destination, distance and payment upfront, then press to book the job.

The platform will streamline something that can take hours of back and forth and long negotiations via phone, putting it in a simplified workflow with confirmation of a job acceptance and payment within a few minutes.

Read the rest of the story here.

 

2. Vietnamese logistics firms increase cross-border transport

Foreign logistics firms are expanding cross-border transport services between Vietnam, China and other countries in the region to meet increasing demands, contributed by growth in ecommerce.

Attention is focused on the development of Shenzhen-Hnaoi-Bangkok, and Kunming-Lao Cai Haiphong networks, which have promising full truckload and less truckload potential.

ZYL is the first Chinese firm that has been permitted to cross the border directly without any trans-load at the border.

Cross border trade between Vietnam and China is becoming increasingly more popular among international firms and Vietnamese firms. The popularity of the market is being driven by the expensive costs of air transport and the risks inherent in sea-based routes.

Read the rest of the story here.

 

3. Recommended Reading: Why Alibaba is betting big on Malaysia instead of Singapore

Operational and labor costs in Singapore are substantially higher compared to Malaysia. Limited and expensive land costs in Singapore is also another drawback as Alibaba requires over 20,000 acres of space for its e-fulfillment center alone.

What else? Read the rest of the story here.

Here’s what you should know.

1. First Circle raises funds to enables SME lending in the Philippines

The fintech startup announced today that it has raised $1.3 million from Accion Venture Lab and Deep Blue Ventures. Last year, the company has raised $1.2 million, counting 500 Startups, IMJ, and Key Capital among its backers.

Founded in 2015, First Circle is a Manila-based online lending platform that focusses on helping small and medium enterprises (SMEs). SMEs represent 99% of all registered business in the country yet only contribute to 40% of economic output.

The company wants to make a difference by giving these companies easier access to capital.

 To date, the company has paid out over $5 million in loans.

The company remains focused on the Philippines for now but it’s evaluating potential expansion options to markets like Indonesia or Thailand.

Read the rest of the story here.

2. iPay88 recorded 161% increase in online transactions in Malaysia

Despite the apparent slump in physical retail in Malaysia, the latest data from iPay88 showed a 161% rise in its online transactions to 38.2 million transactions in last year from 14.6 million transactions in 2015.

iPay88’s Executive Director, Lim Kok Hing, attributed the spike to the growing availability of internet shopping services, like Lazada and Lelong, as well as development in mobile technology.

Malaysians are among the most avid mobile technology consumers in the world, with an estimated 17.8 million people in the country expected to be smartphone users by the end of 2017.

The data also showed the most popular category for online purchases were for games, general ticketing, fashion and apparel.

Read the rest of the story here.

3. Recommended Reading: Where is Indonesian ecommerce headed?

Indonesia’s population of over 250 million and its rapidly growing internet adoption are the good recipe for the potentials for ecommerce market in the country.

With its recently changed in regulations to allow more foreign investment in the sector, the country is hoping to attract more foreign investors.

Indonesia’s investment service agency only recently allowed 100% foreign ownership for investments above 100 billion IDR or $7.53 million for the establishment of ecommerce company in the country.

However, Tororo’s Director William Gondokusumo predicted it will not push the local ecommerce companies out of the competition because of their “community-focused” approach.

Read the rest of the story here.