Ikea Is Making a Post-Pandemic Gamble

The furniture giant is betting not only on customers returning to physical stores, but to cities, as well

IKEA’s Jingan City store in Shanghai, China on July 23, 2020. Photo: Costfoto/Barcroft Media via Getty Images

One of the biggest winners in our virus-induced straits is the home improvement industry: Folks are fixing up their bathrooms, adding on rooms, and installing elaborate patios, pools, and gyms. The suburban real estate boom has added fuel to the fire, as a rush of urbanites relocate to homes with grassy spaces. These trends have had a gigantic upside for businesses like Wayfair, Home Depot, and Lowe’s.

Not so much for Ikea, the Swedish-based furniture chain. For decades, Ikea was the go-to store for the masses with empty rooms to fill, or life-stages to adapt to. And with its low-priced, ready-to-assemble furnishings, it should have benefitted as much or better than anyone from the home improvement mania. Instead, it has slumped, temporarily closing stores rather than extending its hours, and worse, failing to prime its online shop and delivery capabilities for the e-commerce surge. Annual sales for the year ending in August were down 4%, to $46.5 billion.

But the company now seems to have woken up in a dramatic way. In a gamble that the home-fixup shift will outlast the pandemic, Ikea says it’s going to launch around 50 new stores, 60% more than the 30 or so it opened last year. That’s in part a big bet that people will remain in nesting mode for the long term, eager to return to physical shops.

It’s doubling down, too, on the return of the city, because that’s where Ikea plans to open most of the new stores. Amid doubts that people are still sold on the urban dream, Ikea is focusing its new efforts on compact stores that will look fundamentally different from the sprawling suburban edifices for which it is famous.

Until Covid-19, Ikea was a quaint mess: Its stuff was sturdy, sleek, cheap, and easy to assemble, but the retailer did not make it easy to get — unless you wanted to pay a ton of money for delivery, you had to haul yourself over to the distantly located stores, navigate cavernous warehouses big enough to house a small city, and drag your stuff to your car. And good luck if you wanted to buy online; you might never receive your order, and even if you did, it could be wildly late. Strangely, this friction was part of its charm — until Covid-19.

Now, Ikea says it gets it. It knows it has to change, and even before the new shops open, there is partial evidence that it’s already doing so: Even while chronically screwing up orders, it has seen a 45% to 60% surge in online sales during Covid. That suggests that even if it’s late to the game, it may already be trying to clean up its e-commerce act — while betting on its next big offline one.

Editor at Large, Medium, covering the turbulence all around us, electric vehicles, batteries, social trends. Writing The Mobilist. Ex-Axios, Quartz, WSJ, NYT.

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