Ikea with 1,000% more demand than expected in Mexico

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In the first two days of its e-commerce operation, Ikea had a demand 1,000% higher than expected. The Swedish company is going ahead with its plans to open a physical store in Mexico, and today it is dealing with a flood of online orders and a market eager to buy its items.

The expression “Det finns inget dåligt väder, bara dåliga kläder” is a saying in Swedish that can be translated as “No bad weather, only bad clothes”, and is used to illustrate that a person may not be adequately prepared for certain circumstance.

If the saying applied to the debut of Ikea’s online sales in Mexico, it could be said that, for the Nordic firm, it was impossible to have a weather forecast to “put on the right clothes.”

In this photo illustration an Ikea logo seen displayed on a
Photo Illustration: Mateusz Slodkowski / SOPA Images / LightRocket via Getty Images

“We launched the campaign in a very discreet way because we expected to grow little; but I am very happy for the support of Mexican consumers, for the overwhelming response. There was 1,000% more demand than anticipated, which is not something you prepare for. We will hire more people to process and prepare purchase orders. We are working on a plan to have the orders ready as soon as possible and we are looking at how we are going to increase the number of people in the customer contact center ”, says Malcolm Pruys, CEO of Ikea for Mexico, through a telephone interview.

Ikea

Rudder gear

The manager explains that there are about 150 people working in the online operation. Ikea faces a big challenge with the pandemic, since the opening of its Oceania store, in Mexico City, had to be postponed to October 2021.

This adjustment in the plans reversed the steps that Ikea had planned to take in the country . In other words, at the beginning, the company hoped to be able to open its first store and then start online sales; However, the health contingency made the debut happen online.

Malcolm Pruys is now studying more efficient ways to provide coverage throughout the country, since home deliveries from the Ikea store are available only in Mexico City and the metropolitan area.

“The strategy with e-commerce consists of guaranteeing the best availability and service for customers. One of the challenges, and one that we share with many retailers, is that Mexico has a very large territory; it is geographically challenging. We want to be present throughout the country, but it will take a while. It will also take us time to get to know the consumer in the best way to be competitive ”.

The cities that visited the website the most were Mexico City, Guadalajara, Monterrey and Tijuana. Europe is even listed as the ninth location from where the most traffic is reported. The country is an interesting market for Ikea and, also, a great challenge.

According to information from the National Statistical Directory of Economic Units, of Inegi, in the country there are about 65,000 establishments dedicated to the sale and manufacture of furniture.

“We still have many questions; We continue to see what the concerns are and from which parts of the country there is greater demand. The supply chain in logistics, particularly the last mile in e-commerce, is complicated. When shopping from a device, it seems very easy to just click a button … and the goods appear; but they must come from somewhere. Furniture offers many logistical complexities ”.

Mexico is particularly challenging for Ikea’s online sales model. In most parts of the world where the firm has a presence, there are physical stores that function as small “distribution centers” for online sales.

In the Mexican case, without the physical store and with a geographical area that is difficult to cover, Ikea must devise the most efficient way to make deliveries. At the global level, the pandemic caused the proportion of sales made over the internet to go from a range of 8 or 10% to another of 20 or even 25%.

“We are seeing that the percentages are reducing as we reopen the physical stores, but I don’t think they will return to the initial percentages. For Mexico, we had a forecast, but with the results that we have a few days after the website started, we will have to adjust them, ”says Pruys.

Long term strategy

Going forward, Ikea’s plans continue to point to the opening of its first physical store in 2021. In the next 10 years, the company could reach cities such as Guadalajara or Monterrey through physical locations.

Ikea’s outlook implies that by the end of 2021, the firm will have between 800 and 900 direct employees and an equal number of indirect jobs.

“Plans have not changed: we continue to look for opportunities to expand Ikea. We will see political and economic changes, phenomena that are not in our control. What it is is that our goals are very ambitious. It is going to take time to have a strong presence, but the plans have not changed: we want to take Ikea to the whole country, ”says Pruys.

USA - Retail - IKEA
Photo: Ramin Talaie / Corbis via Getty Images

The expansion plan not only implies positioning the Ikea brand and the physical and virtual stores; Malcolm Pruys explains that, for Ikea, it is important to acquire local suppliers that can enrich the offer, not only for Mexico , but also for the United States and Canada.

“The virtual store implies a catalog of 7,800 items; we do not have [them] all because logistics chains have been affected all over the world, and that alters availability. It is not an easy matter to solve; it’s going to take some time. [But] there will be new items constantly available, as connectivity improves. “

Pruys explains that the merchandise produced today in Mexico is still scarce. Regarding the used furniture purchase program, recently announced by the corporate in Europe, he explains that it is not a measure that can be observed in the short term in our country.

“As a new market, we are not yet ready to be part of the initiative. Our sustainability ambition is to implement social responsibility actions here in Mexico. For example, we worry about what type of vehicles we are going to use to deliver orders. But we are not yet in a position to implement that specific initiative today; We need to be at a point where we have not reached: establishing the brand, making sure that the online experience is good and that the store works well. They will be implementations for the long term ”, he adds.

Source: Forbes Mexico

Mexico Daily Post