February 11, 2020 / 9:07 AM / 16 days ago

IKEA new CEO targets 'even more affordable' furniture as habits shift

STOCKHOLM (Reuters) - IKEA named insider Jon Abrahamsson Ring to succeed Torbjorn Loof as chief executive of the world’s biggest furniture brand on Tuesday as it adapts to seismic shifts in shopping.

FILE PHOTO: The IKEA logo is seen on flags outside the IKEA Concept Center, a furniture store and headquarters of the IKEA brand owner Inter IKEA, in Delft, the Netherlands March 16, 2016. REUTERS/Yves Herman/File Photo

Abrahamsson Ring told Reuters that he was not planning any changes to the strategy under Loof, 55, with affordability, accessibility and sustainability at the top of his agenda.

“With a new IKEA direction and a solid franchise system in place, it’s a good time for Torbjorn to hand over responsibility,” Inter IKEA Group Chairman Anders Dahlvig said.

Inter IKEA is a franchisor to store owners, of which Ingka Group is the largest, and manages design and supply. It generates most of its revenue selling goods to its retailers.

Abrahamsson Ring, 45, who is running Inter IKEA’s franchising division, will take over in September. He rejoined IKEA [IKEA.UL], where he had worked from 1998 to 2008, in 2017.

“I think we could broaden the product range a bit in our lower price range,” Abrahamsson Ring said, adding that new materials, production techniques and distribution methods would help make IKEA “even more affordable”.

Consultancy Kantar Retail analyst Ray Gaul said Loof, who has been CEO since 2013 and with the group of companies and foundations that make up IKEA for three decades, had overseen some of IKEA’s biggest and most complex transformations.

IKEA has found that customers are less willing to trek to its out-of-town warehouses and carry the budget furniture home, opting instead to shop online and get goods delivered.

It has responded by boosted its digital offering and other services and is rolling out new and more accessible smaller-format stores and showrooms in inner-cities.

Loof has said he sees sales growing this fiscal year as online trade expands, but profits will be tempered by increased investment as the group fights to stay ahead of rivals like Amazon (AMZN.O) and Home24 (H24.DE).

‘FURNISHING SOLUTIONS’

A shift to the “experience economy” means IKEA will have to “reach shoppers in urban areas, connect IKEA to eCommerce platforms, find ways to make it easier to imagine how a living space might look after a makeover, and more,” Gaul said.

Easing purchase power in some groups in Europe and North America are a great potential for IKEA, as is growing purchase power in emerging markets, Abrahamsson Ring said.

“We see that for many, price remains a barrier to having good furnishing solutions ... not just for markets such as China or India, but also in our most mature markets where living costs have risen more than incomes,” he said.

Loof said he would leave IKEA, which during his time in charge has increased its number of franchisees and expanded to some 15 new markets, but did not rule out returning one day.

Reporting by Anna Ringstrom; Additional reporting by Colm Fulton; Editing by Louise Heavens and Alexander Smith

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