As we continue our focus on global retail transformation we welcome Wim Blaauw, Chief Digital Officer for the Inkga Group/IKEA. In a wide-ranging discussion we explore the concept of human-centric technology innovation including the notion of responsible automation.
As we continue our focus on global retail transformation we welcome Wim Blaauw, Chief Digital Officer for the Inkga Group/IKEA. In a wide-ranging discussion we explore the concept of human-centric technology innovation including the notion of responsible automation. We also discuss the Group's sustainability efforts, an accelerating commitment to digital transformation, and the evolution of its omni-channel strategy. We conclude with an overview of Ikea's hybrid format growth strategy in response to unrelenting disruption.
We kick-off the episode with the week in retail news and a brief progress report on Steve's annual predictions. We revisit the "disrupter reset," dipping into Rent the Runway and Stitch Fix's progress (or lack thereof) before turning our attention to the accelerating collapse of the unremarkable middle. We also explore emerging troubles among luxury department stores, before concluding with a word of caution on the idea that Nike is backtracking on its Consumer Direct Offence.
About Wim
Wim Blaauw is Chief Digital Officer (a role he shares with Parag Parekh) at Ingka Group. He has the responsibility for developing digital capabilities and accelerating the digital transformation of the business.
Wim has extensive experience in retail, supply chain and digital. He joined IKEA in the Netherlands, in 2002 where he, among other roles, was Store Manager for IKEA Haarlem and Country Retail Logistics Manager. In 2013, he left for IKEA UK/Ireland for a position as Deputy Country Manager, leading the multi-channel transformation. In 2016, Wim became Customer Fulfilment Manager and Fulfilment Operations Manager. In 2020 he became the Digital Performance and Development Manager responsible for building digital capabilities globally and securing that Group Digital is operating efficiently.
Wim truly embodies the IKEA vision and values as a leader. He believes in the spirit of togetherness, that we are stronger when we trust each other, pushing towards the same direction, and above all, having fun together.
Wim has a degree in Economics and Supply Chain from HU University of Applied Sciences Utrecht. Wim is married, has three daughters and lives in the Netherlands. Outside of work, he has a passion for sports and loves being outdoors.
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global eCommerce Leaders podcast, and The Food Professor with Dr. Sylvain Charlebois. You can learn more about Michael here or on LinkedIn.
Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue, his YouTube BBQ cooking channel!
Michael LeBlanc 00:05
Welcome to Remarkable Retail podcast, Season 6, Episode 22, presented by MarketDial. I'm Michael LeBlanc.
Steve Dennis 00:11
And I'm Steve Dennis.
Michael LeBlanc 00:13
For our very special guests interview on this episode, we are off to one of my favorite cities been there about half dozen times, Amsterdam, to chat with Wim Blaauw, Chief Digital Officer, IKEA retail, the INGKA Group,
Steve Dennis 00:25
I feel like we've got back-to-back episodes of these iconic brands that everybody's known for, for decades at this point and it's just a fun, a fun company to learn about and they did a lot of interesting things, I wasn't so aware of all that they had up to. So, it was fun to hear about that at the World Retail Congress and then to get them on the mic to, to unpack it as the kids say.
Michael LeBlanc 00:49
Yeah, and special thanks to the folks at, at the INGKA Group and IKEA because they introduced themselves and we didn't have the time and neither of us had the time to fit it in, in person in Barcelona, but we, we did the great follow up and it's a fantastic interview and as you say, it's funny. I don't think we, maybe, we should tell people we intended this to happen, but -
Steve Dennis 01:11
I mean, we've been planning this for years, its the whole ark. It's kind of like the succession planning, you just knew how we're gonna land this.
Michael LeBlanc 01:19
Alright, well, let's, let's get right into the news or should I say let's get the allen keys out and assemble the retail news of the week for the people.
Steve Dennis 01:26
How much time do you spend thinking about these, these intros, they always catch me off guard.
Michael LeBlanc 01:33
These scripts right themselves come on. Now we were talking off mic and, and you know, our typical review of the news, we thought we'd start weaving in though we kind of have for many of the episodes, a bit of your predictions from the beginning of the year and then there's a lot of predictions, we're probably not going to do a full predictions mid-year check, so to speak, but we thought it make a nice idea to, you know, in the world of these things, sometimes right themselves to kind of integrated in what we're talking about.
So, there's a bunch of results out and news and it all fits kind of in your prediction of the disrupter reset, and '22, as you said, was a pretty rough year and remind the folks what you said about 2023 for the so-called disruptors.
Steve Dennis 02:18
Well, essentially, it's that the, the toughness, I guess, or rough road was going to continue, at least for those that are not able to kind of right the ship, which so far, we're not seeing much of that, but in particular, as we get into, you know, really multiple years of this kind of era of profitless prosperity. In other words, you know, growing but not able to get on a path to profitability, that we'd start to see some big changes.
Steve Dennis 02:46
So changes could include some of the founding executives, getting, you know, leaving or getting kicked upstairs, lots of expense reduction to try to see if they can move towards profitability, a shift in continuing shift, I should say, really, for most of these brands, from the strategy being kind of pure DTC to doing things like more wholesale distribution, but also, which sort of plays against the wholesale thing, or in concert with the wholesale thing is maybe pulling back on their store expansion strategies, or maybe even getting acquired or maybe even going out of business if they can't figure things out. So, a lot of possibilities and you know, it's a big playing field to sort out, so it's not gonna be one thing in particular.
Michael LeBlanc 03:30
Well, let's, let's use that as a segue then. Let's go to the wildly unicorn section of the podcast because we've got a few examples of what you've just been saying and, and the examples. Again, we've been talking about them for many, many episodes, but highlight a few of the examples that would kind of put an exclamation point on your thinking around this.
Steve Dennis 03:52
Yeah, there are a lot of them and yeah, as you said, we've, we've mentioned a bunch of these along the way. So, I'll be really quick about it. But I think Allbirds is a great example of a company that has really struggled to get to profitability, and if anything's, if anything, things have been getting worse. So, they have slowed down their store opening pace. They've been starting to emphasize wholesale more, one of their founders, still at the company, but he's taken a more subordinate role. We've got companies that have been acquired or maybe about to acquire, so ASOS the online retailer rumors that they're about to be acquired because they've really been struggling of late and then a company, I don't know how many people would know about Boxxed, their, their CEO, it was speaking at a lot of conferences over the last few years. Basically, kind of essentials in a, in a box.
Michael LeBlanc 04:43
Essentially.
Steve Dennis 04:45
Yeah, kind of-
Michael LeBlanc 04:46
Literally named anyway.
Michael LeBlanc 04:47
And now let's, let's transition from there into some earnings. Let's start with Rent the Runway.
Steve Dennis 04:47
Yes, very, very on the, on the nose kind of name. They've been struggling and they actually just announced that they're being liquidated. So, here's an example of a, I guess, a wobbly unicorn that, that fell over or has expired, I don't know, this is very negative, we gotta try to make this a little bit more uplifting.
Steve Dennis 04:52
Yeah, just I mean, part of the reason to connect this to the prediction is we did have two of the more prominent disruptor brands report their earnings this past week, Rent the Runway, I guess, on the positive news, they were struggling for a while getting the top line going and they were losing subscribers, they've started to turn that around so they had about an 11% sales increase. They had growth in active subscribers.
Michael LeBlanc 05:36
We don't hear that often. Right, we don't hear that often in this group.
Steve Dennis 05:39
Greatly improved their gross margin, as some of that was clearing out some, some inventory, I think, and they did cut their net loss by about $10 million. So that's positive, however, a net loss.
Michael LeBlanc 05:50
That's a positive look, by the way, for many of these as they lose less, basically, is what I'm seeing.
Steve Dennis 05:54
Correct, yes, we'll get to in a second another one, but their net loss is still 40% of sales. Now, one thing I should point out, which is, makes it difficult to compare two, two brands, you know, sort of big established brands, as many people might know, most of these disruptor brands, there's a lot of money that goes into stock compensation. So that's a big expense line on, on a GAAP recording basis. So we have to look at the loss a little bit with a grain of salt, it's probably better to look at an adjusted EBITDA margin or their cash flow, on, now under that basis, they have reduced their negative cash flow. So also going in the right direction, but still, there's a lot of cash going out the door, the company's stocks recovered, a little bit, been less bumpy, but you know, it's down like 80%, since they went public about five years ago. So, they got a lot of work to do there.
Steve Dennis 06:55
Then the related ones just real quickly, kind of a similar story, big picture, Stitch Fix, except that they are having a hard time getting the top line moving, they had a 20% decrease year over year, they're active clients down, revenue per client down, but they have started to make some progress and cutting their losses, they did have positive cash flow, some of that some inventory adjustments. So that's maybe kind of a short term thing, but again, another one of these disruptor brands that has seen their stock absolutely collapse, they're actually down over 90% in just the last two years, but because they cut their losses the stock bounced back a little bit, but anyway, you know, I guess, you know, it's still a picture of some progress, but both of these companies have a long way to go, to get to profitability, and you know, the economy is probably not going to help them too much over the next 6 to 12 months.
Michael LeBlanc 07:50
Well, in the case of Stitch Fix, it would also probably, and we've talked about this in the past, so I won't dwell on it too much. The, the, the double tap on them, so to speak, is with less people going into the office, they don't need five days a week of apparel, right. So that's got to be kind of a drag and then you know, just secondly, you made the point that, you know, they probably tapped out on their addressable market, like the addressable market just doesn't keep going up and up and up. There are only a certain number of people who want to, you know, consume or get a product in their subscription service, but anyway, we wish them as always, we wish everyone the best of luck.
Michael LeBlanc 08:26
Now, let's talk about the collapse of the unremarkable middle picking up steam and that was a kind of a foundational element, really building on a lot of your work and it was one of the predictions now, you know, we don't have to go too, too far to think about this. There are some brighter points, but you know, when you think of what we've been talking about, JCPenney, we haven't talked about JC Penney, actually in a little while. Macy's, you know, where do we think after a bit of a hiatus, can we say for trouble during COVID they actually probably benefited from COVID in a weird way. Where do you, that's gone, where do you think they are now?
Steve Dennis 09:02
Yeah, I think that, well, you know, we touched on this a little bit. I mean, a lot of this I cover, if people have read my book, I mean, I cover the, the collapse of the unremarkable middle is kind of a key theme, this idea of the bifurcation, et cetera. We've talked about, a bunch of times, so I won't go into that. The, the point here was, was what you're saying, which there was a little bit of a pause, due to some-, due to COVID, due to some other, other factors.
Michael LeBlanc 09:24
Shopper dynamic changes, yeah.
Steve Dennis 09:26
Right and then kind of this bounce back, that may be masked, to really the underlying trends, but the underlying trends continue to be quite, quite poor and what we're starting to see, and I've talked enough about the department stores, so I think I'll skip that for now, but we're also continuing to see this more broadly, we're seeing store closings, picking up pace, according to Coresight, they're up 61% year over year. Now, Bed Bath and Beyond that counts for a lot of those-
Michael LeBlanc 09:54
Big chunk of those.
Steve Dennis 09:55
Stores, so it's a big chunk. So, I think we want to get a little bit broader sample before We draw too much from that, but everything from Joann stores, the Craft Store to DSW. I mean, a lot of these brands that were kind of it had an interesting niche maybe 20 years ago but have really gotten more competition not only from the internet, but from some specialty stores, you know, they're really struggling, a number of them are on, you know, bankruptcy risk alerts and those kinds of things. So, we're not seeing much evidence of any kind of turnaround or any kind of sustained growth. So I think this continues to be a place to watch, I think we will see some more bankruptcy filings in the back half of the year and I do think we will see some pretty large scale store closings on the part of these retailers the balance of the year and you know, frankly, probably a lot of it will occur after the Christmas holidays, so doesn't quite make it into my, my prediction year, but that's sort of a timing issue, I guess.
Michael LeBlanc 10:55
Let's talk about, about Nike and Macy's and what's happening in luxury that you're picking up on this week?
Steve Dennis 11:01
Well, there's been some interesting stories about Nike deciding to go back to Macy's and I've seen some stories talk about, you know, Nike's direct-to-consumer strategy is not working and many of those stories state that Nike intended to completely get out of wholesale, which is 100%, not the case. So that one is just the stories where they, like Modern Retail had a story on that, that they're going back on their plans to go totally direct. Nike has never at least publicly stated.
Michael LeBlanc 11:30
Never said that.
Steve Dennis 11:31
They've never publicly stated that. I can't, Nike's a former client of mine, so I can't speak too much specifically, but basically, and I haven't worked for them for a while, but I would be shocked if they ever intended to go fully direct. Let's just say that.
Michael LeBlanc 11:45
It'd be very uncharacteristic of them to do such a-
Steve Dennis 11:48
Yes, yes and in fact, they've said many things and make it clear that they understand the balance between, between wholesale and direct-to-consumer. Having said that, I think it is interesting that they are backtracking a little bit because they did exit Macy's and now, they're going back in and I do think that suggests number one that they need, that maybe there's some opportunity to because of over inventory, I think this is a little bit of kind of getting their nearer term performance back on track. I also think it suggests that yes, maybe they have concluded they went a little bit too far. In the scheme of things Nike at Macy's because they're not, I think only going into a handful or not a handful, but a limited percentage of stores, not big in the scheme of Nike's overall strategy, nor is it going to be a game changer for, for Macy's. So, the kind of Much Ado About Nothing, I think to a certain degree, but mainly, I just wanted to kind of correct the record that Nike has never said they wanted to completely get, get out of wholesale.
Steve Dennis 12:46
And then just really quickly on, on luxury, you know, this kind of this narrative and we touched on this a little bit an episode or two ago, that luxury is immune to economic down cycles, in my experience at Neiman Marcus is that the very, very high end of luxury is pretty much immune, but the more accessible luxury segments, which you know, probably accounts for 60 or 70% of the sales at retailers like Saks or Neiman Marcus, you know, that can be very much affected by economic down cycles and the reason we have this story this week is that both Saks and Neiman’s commented on their financial performance, neither one of them are public companies. So, we don't get quite the level of detail, but they do share information with the, with the markets, and Saks, and Saks is complicated now, because they got Saks Fifth Avenue and Off Fifth and dot com and stores and so, but, but the net picture from Saks was that their business is pretty much down across the board in all four parts of that business.
Steve Dennis 13:43
And then Neiman Marcus Group also reported that their sales were down in the most recent quarter by 9%. So that's a pretty significant decrease. My expectation is that the top part of that business is flat to up, but the rest of the business is down more than double digits. So, and you know, similarly their profits aren't great. One of the comments that the Neiman's CEO made was that in addition to just people pulling back on more discretionary spending, they're also very clearly seeing that the high end customer is shifting their spending towards travel in particular, and more experiences, which you know, we've touched on that as a broad trend of the industry, but he said they're particularly seeing that with their customers. So, I think that's something, something to watch going forward.
Michael LeBlanc 14:32
Let's end on the value end of the equation. Let's talk about Walmart and I think sometimes we, we lose track of how big they are and what a percentage or two that means to Walmart. So, comment on that compared to you know, just put it in, in some kind of comparison to folks just so we continue to benchmark what, what big looks like.
Steve Dennis 14:52
Yeah, well, I was, I was reminded this is probably going back 20 years ago, I was at a Harvard Business School conference event, where one of the professor's talked about how big Walmart was and how, at the time Walmart was growing, you know, I don't know, 5 or 6% a year and he made the comment that if you think about 5 or 6% growth on top of how big Walmart already is, again, 20 years ago, you said, you know, they're growing a JC Penney, I don't know, he listed a bunch of big brands, every year and, and I was like, wow, yeah, yes. If you think-, stop to think about it, that must be true. Well, sort of a similar thing came out this week, because Walmart, in addition to reporting the growth that they've been experiencing, but also because of some of their plans, as we talked about with Judith McKenna, the president Walmart International to add $100 billion in incremental sales. Yeah, last year, Walmart grew by the equivalent of Dollar General's entire sales.
Michael LeBlanc 15:51
Right.
Steve Dennis 15:51
And I know we have some people from outside the US who maybe, not know Dollar General listening, but Dollar General is a huge dollar store.
Michael LeBlanc 15:59
Thousands of stores.
Steve Dennis 16:00
Thousands and thous-, I don't-, I don't know, I don't even know how many. Yes, many, many, many, many-
Michael LeBlanc 16:04
Many, many, many stores.
Steve Dennis 16:05
Of stores and yeah, just yeah, when you get to that scale, it's pretty, it's pretty incredible, but to think about how much market share, I mean, some of this is inflation, of course, but I mean, to the extent that they are picking up real growth, that is just a lot of customers, a lot of transactions. I mean, the scale of it is for companies like, like Walmart, like Amazon, like Costco, like Target, it's really quite extraordinary.
Michael LeBlanc 16:32
Well, that's a wonderful segue you just created for us there, to our, a little bit of a promo for our next upcoming episode, which is an exclusive interview with Jason Del Rey in his new book coming out, Winner Sells All: Amazon, Walmart and the Battle for Our Wallets. So, I'm just halfway through the book. It's a really interesting book and we got, we got Jason on mic. So, lots of great insights and discussions to follow. Now, just before we get to our excellent interview with Wim from Ikea, let's hear from our presenting sponsor.
Michael LeBlanc 17:06
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Michael LeBlanc 17:38
Wim, Welcome to the Remarkable Retail podcast. How are you doing this afternoon?
Wim Blaauw 17:43
Yes, thank you. Great, great to be here. Yes, doing really well. Sitting here in a, in an office with a lot of people. We're celebrating midsummer today. So that is pretty exciting.
Michael LeBlanc 17:56
Well, fantastic. Now Steve and I had the opportunity to meet you in person you stopped by, you were kind enough to stop by and say hi, before we jumped on the mic today, back in Barcelona at the World Retail Congress. Where are we finding you today, where are you sitting today?
Wim Blaauw 18:09
Yeah. So, today I'm in, I'm in Amsterdam, we have a, we have a hub here in Amsterdam, where we actually have quite some digital folks. Over 500 we established this hub almost, well, it's two years ago, actually. So, this is now one of the digital hubs that we have around the globe.
Michael LeBlanc 18:29
Fantastic. I love the city. I was there this time last year actually, what a wonderful city and a real hub for digital, right? It's a very advanced city in terms of attracting a lot of talent. I guess that's what attracted you to set up your hub as well.
Wim Blaauw 18:43
Yeah. 100%. Of course, the main reason to also establish one in Amsterdam was the availability of fantastic digital talent here.
Michael LeBlanc 18:50
Yeah, not to mention, it's such a wonderful city. So, it's nice when, it's nice when the two come together, right. Well, listen, tell us a little bit about yourself, your background and, and the work you do at, at INGKA.
Wim Blaauw 19:02
Yeah, so yeah, maybe a little bit of background, my name is Wim. I work as the Chief Digital Officer for INGKA Group. What we do is, we run IKEA retail amongst a few other things, but maybe we can come back to that. I have been, I've been with IKEA for it's actually quite remarkable, almost 21 years. I didn't imagine that when I joined back in 2002. I'm Dutch, I grew up in the Netherlands. I studied logistics and economics and, you know, after a few years of work experience, I decided to apply at IKEA.
Wim Blaauw 19:42
You know, first of all, it was a really fun place to shop, but I also heard very good things about you know, leadership, the culture and the values. So, I applied. I wanted to work on logistics because I have logistics backgrounds. There was not a logistics position available back then, but there was a really good click and fit between us. So, I decided to jump and they offered me another position that had nothing to do with logistics. It was store, it was a role in store operations, and I joined, I joined six weeks before, before we opened a store in the Netherlands and it's been amazing ever since, I would say, right, I've worked in, I've worked in different stores. I've worked in country organizations in the Netherlands in, in the UK. I've worked in different group functions and now I have this fantastic opportunity to lead the digital developments for, for INGKA. So, it's been really great.
Michael LeBlanc 20:39
Fantastic. Well, a click and fit, I might say, just like the wonderful way your products go together. So, I love the way you, I love the way you described it. Now, I wanted to touch on one thing and you've, I described you as with INGKA and you joined IKEA. So, help the listeners understand the difference between those two things, as I don't think that's commonly known.
Wim Blaauw 20:59
No, I think it's, I think that's, that's a fair question. You know, we have we have quite some companies in the, in the total IKEA ecosystem, but obviously there is only one brand, right and I think that is that is probably the most important thing to remember, for our customers, there is only one brand and that is, and that is IKEA, but the company that I work for is called the INGKA, INGKA Group, but we do, we, we have three core businesses, right. One of the core businesses is INGKA Investments. The other one is INGKA Centres and by far the largest one is, is INGKA Retail, IKEA Retail.
Wim Blaauw 21:40
So, what we do, we, we operate the retail business, the stores, the online business, there are more companies like INGKA. So, we are a franchisee, but we are the largest one, right, so we have more than 90% of the total retail business globally. We run almost 500 stores in 31 countries and then of course we have online, the app and so on. That means that we are part of a franchise system, right. So, there are, there are the franchisees and then there is also the franchisor, which is called Inter IKEA Systems and that is where we have to simplify production, product, product development and distribution and that is also the company that is responsible for the concept and concept development and we work very closely together.
Michael LeBlanc 22:33
Well, it's, it, I would say it's wonderfully opaque, I guess you could say to consumers, even folks of the trade, right, Steve? I mean, Steve, you and I had this, this idea when we were sitting in Barcelona, we're like what is this, what is this INGKA Group and, and we, and, you know, we've been, we've been kicking around in retail a long time. So, it's wonderfully, wonderfully just brand forward, blue box forward. Question for you around, and this, this kind of came up as, as a general overall theme, both when we talk to you in person and just hearing you on the stage, just the evolution of digital transformation that you described to us, was, was in a human centric way and of course that got our attention, talk about that a little bit.
Wim Blaauw 23:10
We are now on the second version of, our of our digital strategy in INGKA, we have four pillars in that strategy, which is around customer experience, coworker experience, digital DNA in the company, but also making sure that we have a modern foundation, but in the core of the strategy, we have said, you know, human centric technology, and that, that means that we want it to be intuitive. We want it to be, when we think about data, we want to do that in a responsible way also thinking about, and I also spoke about that at World Retail Congress in Barcelona, when we think about AI and all the fantastic opportunities and possibilities, in that case, it also comes in our opinion with a responsibility to do that human centric and to do it and to do it in a responsible and in a good way.
Wim Blaauw 24:09
So that is, that is really how we want to work with a digital transformation and with our, and with our digital strategy and that very closely links as well to the vision of IKEA because the vision of IKEA is to create a better everyday life for many people and of course, we do that by offering fantastic home furnishing products at low prices, but there is so much more to it, right. So how we do our business, how we work with, how we work with data, how we work to sus-, sustainability, how we want to do things in a responsible way, is very much linked to that vision and that's also what we want to incorporate into digital strategy with the human centric technology.
Steve Dennis 24:52
So can we talk about that a little bit deeply. I really enjoyed hearing your presentation at the World Retail Congress and it's not necessarily to just try to give our listeners a sense of specifically what you talked about at the event, but, but so many of the themes you got into, responsible automation, sus-, sustainability, building agility into your operating model, I thought were really fantastic. Could you, could you maybe take those and give us a bit more of a sense of how you got there, what's going on right now and really what you're aiming to achieve?
Wim Blaauw 25:28
Yeah, well, you know, the main theme of the speech in Barcelona was about responsible automation, which is, of course, one, but an important angle to it, right, because in, what we're doing right now, in the whole retail and digital transformation, is a lot around, you know, I shared examples such as drones that do, that do inventory checking, I shared some examples around things that you can do in the app, but also automation, but also automation in our in our stores, because our stores more and more, apart from stores, experience centers, they also more and more serve as fulfillment as, fulfillment units and that's all great and important and of course, it helps us to be, to be more efficient, but at the same time, we also want to do that in a way where there is a win-win also for our coworkers, right.
Wim Blaauw 26:31
So the automation of, usually, comes in to play in order to make life easier for, for our, for our customer, better for our customers, easier for our coworkers, but at the same time, it is also a fantastic opportunity to create more value for the work, for the work of our coworkers. So, if you, if you, it's an opportunity for us to upskill and reskill our coworkers, and by doing so it really becomes a win-win, right. So, because we have the automation, which of course helps us in the end with better customer service and better profitability, but at the same time, we also have an opportunity to make life just easier and better for, for our coworkers. So that's one example around responsible automation that I, that I shared.
Wim Blaauw 27:19
Your question, I think was a bit broader, right, we can, and then, when we look at the, the strategy for the totality of the IKEA companies, what we want to, what we want to achieve, we want to be more affordable, we want to more accessible, but we also want to be more sustainable, so better for, better for, better for the planet and for the people and that is that is super high on the agenda. You know, we have, we have really strong commitments around becoming climate positive by 2030. Right, which basically means that we want to reduce more greenhouse gas emissions than we create even taking our growth into consideration and we do that in many different ways, right, we focus on renewable energy. We have very strong commitments to do last mile deliveries with, with EV vehicles. Obviously, we help our customers with sustainable products with sustainable products that help them to reduce energy consumption and water consumption. Yeah, and there's actually a lot more ongoing.
Steve Dennis 28:25
Yeah, I think it's, as I said, I found, I found your discussion really, really interesting. I'm wondering, I guess, both with respect to implementing automation, but also with some of the sustainability initiatives, you know, one of the things that we hear a lot is, is this concern that more automation, whether we're talking about robotics, or generative AI, or what have you, is going to eliminate a lot of jobs, or that sustainability is really expensive to implement and therefore, it's really a tradeoff between kind of doing what's right for the world and doing what's right for shareholders and those, those sorts of things. Do you feel like those are false choices or how do you navigate that kind of thought process when you move forward on these initiatives because obviously, you're doing quite a lot in both regards.
Wim Blaauw 29:15
So, we did a, we did a leadership program, not so long ago with, with many, with many leaders. In the INGKA system, Leadership in a New Era is, was the name of the program. Not the first version, by the way, we started with that pre-pandemic, and I think it helped us a lot. Mainly in the context of, I think, resilience, resilient, and how you lead through those difficult times. Leadership in the New Era 3.0, that we just did, was very much about adaptive leadership and one of the topics that we discussed was how you deal with polarities, and I think these are typical examples of polarities, right. So on, on one hand, yes, you put in, you put in automation, but you want to do that in, at least we want to do that in a responsible way. So, it is true, certain jobs will disappear, but we are really convinced that many other jobs right now and in the future are going to be created.
Wim Blaauw 30:24
And then we should also not forget that we are still growing, that is one, we are developing our business. So that also comes, that also comes with new opportunities, and it is also, we think, an opportunity to have more coworkers with, with full-time contracts, right. Obviously, in the retail business, there are a lot of part time contracts and that comes with issues, right, because people often need a second or even a third job, right. When you look at a retail business in its totality, by doing this in a good way. With crea-, with the creation of new jobs that will be there, and it's super high on our agenda, we believe we will have the opportunity to provide more full-time jobs to people.
Wim Blaauw 31:08
So that is that is, that is I think one one example that you were after, we strongly believe that it should not be the case that when you buy a sustainable product, that it's more expensive, right. We strongly believe in the combination of affordability and sustainability, and we have, we have actually many good examples in the business with fantastic sustainable products that also have a low price. So, it is possible, we believe, and it is really high on the agenda to have more and more of those examples for our, for both our customers and for our coworkers because I think it's, first of all, the right thing to do and it is also very clearly linked to our vision in order to create a better life for many people.
Michael LeBlanc 31:57
It's a fantastic discussion around refusing to make the traditional tradeoffs, right, that you've just described. So, it's really quite, quite encouraging. Now, if we could step a little bit into the business side, what, you know, many things attract our attention about, about the brand, but we, there's some recent news about, some very significant expansion plans, particularly here in the US for the, I guess, we call them the big blue boxes, but also very interesting and a variety of small store formats, some of which are, we've seen are in the country, can you can you step out and give us a sense of where the expansion and the growth of the retail business is headed and is it a global strategy or is it a kind of market by market strategy?
Wim Blaauw 32:38
Yeah. So, the US investment, as such, right, that we, that we announced not, not too long ago, is a US 2.2 billion investment and this is really about, let's call it, key strategic retail and digital investments. So, it is about investing in the existing stores. It is about opening new store formats, let's say the traditional blue boxes, but also smaller formats, but we also want to invest in fulfillment and services because this is, this needs to be a perfect combination of how we can enable omni-channel retailing in a good way. So, all those different elements of omni-channel retailing, including new digital capabilities to do orchestration for audits, for example, is all included in that investment in the US.
Wim Blaauw 33:42
But that's not the only thing we do. We are, there is, there is a very strong plan to expand in India. We also recently announced that we are doing a 1.2-billion-euro investment in France. So our expansion agenda is, is quite big and aggressive, I would say and then, and then I don't know if you if you pick that up, but yesterday, we also announced that, that we did, that we did another acquisition in the USA around company m-, company Made4Net, which is a ware-, a software, a software provider, warehouse management and fulfillment management system and that is of course going to serve. It's going to help us in all countries, but definitely also in the USA. So yeah, we are, we are continuously investing in the expansion of the brand.
Steve Dennis 34:44
That's super exciting. I'm curious if you could, and this is a little bit of a self-serving question in a way, because I was excited when I heard about some of your plans because I think it very much fits with what I've been writing about and speaking about in terms of how retail strategy needs to evolve in being more hybrid, both between physical and digital, but also thinking about a portfolio of different formats. My belief has been that there, you know, that there was this era, I think for out throughout most of retail in different countries that most retailers had kind of a one size fits all strategy.
Steve Dennis 35:19
You know, they had their, whatever their particular box was, obviously, people are quite familiar with the big IKEA box and that was the thing he kind of kept stamping out and I think it's become harder and harder, somewhat by virtue of the way competitive strategies evolve somewhat certainly, because of E-commerce and, and just general trends, it's become harder and harder to kind of be a little bit of everything for everybody, and more. So one, I guess, you know, that seems to be part of what you're doing, but more, I'm curious, how did you get the team to shift away from that kind of one size fits all strategy that was so, you know, been so successful for so long to embrace this more hybrid, diverse, integrated, whatever you want to describe it approach, can you give us some insight into the process of just culturally, how you got there?
Wim Blaauw 36:14
Well, first of all, this is, of course, very much customer lead, right, let's not, let's, let's not, let's not ignore that, right, this is, you know, the whol-, the whole retail disruption that has been going on for quite a while now is a combination of, you know, customers, customer expectations, and retail innovations, right, because they go hand in hand, hand in hand, becau-, because of retail innovations customers expect more, and so on, and so on. So, then we have had a traditional single channel catch and carry model for a very long time. Right and it has served us extremely well. You know, it's been, it's been a true win-win, I think for, for our customers and for the company, right, with, with the perspective that we had the furniture in our, in our big blue boxes, the customer would, would pick it themselves from the shelfs or from the sales spaces in our in our market hall. They would bring it home themselves, they would, they would assemble it themselves.
Wim Blaauw 37:23
And because of that, together, we were saving money, right, it's actually, you know, our founder did an amazing job, I think, a fantastic formula that worked really well for a long time, then, of course, the online, the online players arrived and we were a bit late to that party, there was definitely some kind of disruption ongoing, our CEO Jesper arrived, now, soon, six years ago, after doing a tour around the globe, where he visited many stores, many countries, had lots of conversations. We together in the company, wrote a new retail strategy and in that retail strategy, one of the first lines was 'we are going to change everything' and then it said, between brackets, 'almost' and, and the 'almost' was really the reference to our fantastic range, our culture and our values because we strongly felt that that we should not change, but apart from that the whole business model, how we would do retailing, how we would work with digital and many other topics were all open to change and that's basically what we have been doing in the last, in the last five and a half years.
Wim Blaauw 38:41
So, from only the big blue boxes, we established a digital organization where we brought in a lot of new talent. Online sales grew slowly until the pandemic, but we were already preparing our systems for more significant growth, which was, which was a good shove, then we were also saying, okay, we have the traditional blue boxes, which sit a bit on the, on the outskirts of the cities, why don't we also open store for much closer to where the people live and then we have an opportunity to repurpose those stores, which are still fantastic and big and you can shop and you can have the experience at the same time we're also using them for fulfillment. So that was the whole and, and much more.
Wim Blaauw 39:30
So, I think the biggest the biggest cultural shift here and the change, I would say, was taking in all those new competences mainly, mainly reflecting here on the people that started in the digital organization because we had a history of many retailers that have been around for a long time and in that catch and carry model. They have been fantastic and still are but all of a sudden we were creating that blend between new competence, new experience digital competence, and bringing the old and the new together and, and I must say, of course, that always comes with a bit of pain and some hiccups, but I would say where we are right now, I'm really proud how we have done that and I think we see the, we see the end result in the retail, in the, in the IKEA retail landscape, all the things that we have, that we have done, the expansion plans that we have, but also the results because the results are quite good.
Steve Dennis 40:37
Well, it's, it's super exciting and I'm really looking forward to seeing what else you do. When you were, when you were speaking, I was reminded of a book-, or a book, a quotation, I included in my book from this US General that says, if you don't like change, you're going to like irrelevance even less, so yes, a lot of times, transformations can be quite, quite painful, but I think the not changing part could be quite painful as well.
Wim Blaauw 41:03
So, you know, yes, yes, it's, it's there-. Of course, there is some pain involved in that, right and it should be like that, because otherwise you don't grow, but it is also really fun, right, because you know that, it's also, you know, one of the core values that our founder had, was renew and improve, right and this, this is so much connected to one of those core values that has been around for a long, long time in the IKEA business. So it also works really, really well and that fits really well.
Michael LeBlanc 41:34
You know, I'll just add, and then Steve, I'll throw the mic back to you to bring us home. Is that there's another example of refusing to make the tradeoff between hard work and fun, right? That it can be both and then organizations can move forward with a very, very positive culture and not make, whether they're false tradeoffs or just not accept that there's a tradeoff to be made. So, with that, Steve, back to you to bring us home.
Steve Dennis 41:59
Well, I loved, I loved the conversation. Thanks so much for joining us, Wim. I'm wondering if there's anything else, just before we wrap up that we didn't get to that you wanted to mention or anything that we should be looking, looking forward to on the horizon?
Wim Blaauw 42:14
Well, you know, maybe, maybe just one, you know, we are turning, we're turning 80 this year as IKEA and I think we are still very young, and I think it is. So, this, this celebration, we call assembling a better future together and I just wanted to mention that because I think it's a quite iconic moment for us. We of course are going to do some, some great things for our customers and for our coworkers. There is going to be a special collection, where we bring back some, some icon products in new colors and new materials and then there will be more, but I think it is just important, this assembling a better future together. It really represents what we stand for, because we have not done this alone, right, we have always done this in very close collaboration with customers, suppliers, and many others and I'll probably stop there.
Steve Dennis 43:20
Okay, well, that's great. I love it. We look forward to everything else you're going to be doing and congratulations on, on that milestone. That's, that's very exciting and I hope to catch you again somewhere out in the world, but thanks for joining Michael and myself on the Remarkable Retail podcast.
Wim Blaauw 43:37
Thank you.
Michael LeBlanc 43:38
If you like what you heard, please follow us on Apple, Spotify, your favorite podcast platform so you can catch up with all our great interviews including Judas McKenna, President International, Walmart. New episodes of Season 6, presented by our friends at MarketDial will show up each and every Tuesday and be sure to tell your friends and colleagues in the retail industry all about us.
Steve Dennis 43:57
And I'm Steve Dennis, author of the bestselling book, ‘Remarkable Retail: How to Win & Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at stevenpdennis.com.
Michael LeBlanc 44:12
And I'm Michael LeBlanc, consumer retail growth consultant, keynote speaker and producer and host of a series of retail trade podcasts including this one. You can learn even more about me on LinkedIn and you can see both of us at the Lead Innovation Summit in July. Live on stage in New York with our friend of the pod Simeon Siegel from BMO.
Until then, safe travels everyone.
SUMMARY KEYWORDS
retail, stores, talk, year, company, ikea, customers, brands, digital, walmart, fantastic, strategy, big, nikes, work, predictions, automation, opportunity, great, little bit