Last November, in the Swedish town of Älmhult, IKEA's global executives gathered under warm Scandinavian-style lighting to discuss a topic not quite "Nordic" in nature: how to survive in the "Pinduoduo era." Recently, this furniture giant with over 80 years of history and around 800 stores worldwide delivered a less-than-ideal report card: Inter IKEA Group's profits for the 2025 fiscal year fell by 26%, and global sales at IKEA stores declined for the second consecutive year. Additionally, IKEA China announced it will close seven traditional stores. Against a backdrop where e-commerce is reshaping industry rules and cost pressures remain difficult to alleviate, what specific challenges does IKEA face? Is its once-proud strategy of "immersive shopping" and "value for money" still sufficient?
The fundamental logic of furniture retail is shifting. In terms of scale, IKEA's global foundation remains solid. Its worldwide retail sales have grown from approximately €10.4 billion (around RMB 84.7 billion) over two decades ago to about €45 billion (roughly RMB 366.7 billion) today, covering 63 markets, maintaining its position as one of the world's largest furniture retailers by volume. In the latest fiscal year, IKEA's global retail sales were approximately €44.6 billion (about RMB 363.4 billion), showing a slight decline from the previous period but no substantial contraction in overall size. In contrast, its profitability is under significant pressure. Inter IKEA Group, responsible for the brand and global supply system, saw its operating profit drop by about 26% year-on-year in the latest fiscal year to around €1.7 billion (approximately RMB 13.9 billion); meanwhile, the net profit of INGKA Group, which handles the primary retail operations, has noticeably receded from its 2016 peak. Continuous price reductions are driving sales volume but also relentlessly compressing profit margins, making IKEA's growth increasingly strenuous.
The challenges IKEA faces stem first from systemic changes in the external environment. On a macro level, the global real estate market downturn, rising tariff pressures, and increasingly cautious consumer spending are directly impacting furniture, a typical discretionary category. At the industry level, a more disruptive change comes from e-commerce platforms. Globally, platforms like Amazon, Temu, and Shein are extending their formula of "low price + speed + extreme convenience" to the home furnishings and furniture categories. Leveraging scaled procurement, flexible cross-border supply chains, and algorithm-driven traffic distribution, they are constantly raising consumer expectations regarding price and fulfillment efficiency. "Consumers crave low prices, convenience, and speed; they are ready to switch channels to get these," pointed out Clarisse Magnin, a senior partner in McKinsey's Consumer and Retail Practice, adding, "E-commerce platforms are rewriting the industry rules. Even the largest traditional players must confront this scale advantage." Simultaneously, the nature of competition is evolving. Beyond platform players like Amazon, online specialty furniture retailers such as Wayfair, along with a multitude of D2C brands offering niche designs and differentiated pricing, are capturing market segments that IKEA has not heavily defended in the past. IKEA's competitors are no longer confined to "another furniture store."
Within IKEA, this wave of external冲击 is seen as a structural issue requiring a direct response. The company is advancing what it internally calls the "largest transformation in IKEA's history"—its third phase of reform. A symbolic change is the appointment of non-Swedish executives to lead its two core entities for the first time: Inter IKEA Group, responsible for the brand and supply chain, and INGKA Group, which operates most global stores. Jakub Jankowski, a 49-year-old Polish executive, officially became CEO of Inter IKEA Group on January 1st this year. In a pre-appointment interview, he stated bluntly, "We perform well in good times; now, we need to demonstrate resilience and agile responsiveness in adversity." The core of the transformation focuses on three key areas. First, the redesign of stores and formats. After long adhering to the large suburban megastore model in major cities, IKEA is accelerating its exploration of smaller, more consumer-proximate store formats. Beyond steadily entering city centers like New York and Paris, the company is piloting a new format called "Lada" (meaning "barn" in Swedish), targeting small and medium-sized towns with populations of 100,000 to 200,000. Second, the deepening of the omnichannel model. IKEA is transforming its large stores into both showrooms and logistics hubs, strengthening online-offline integration. E-commerce sales now account for 28% of its global sales. "In the omnichannel era, stores remain the core pillar of the IKEA experience," emphasized Juvencio Maeztu, who became CEO of INGKA Group last year. Third, control over key resources. The stability of wood supply, a core raw material for IKEA, has been elevated to a strategic priority. Following restrictions on sourcing from Russia and Belarus, IKEA has increased its presence in Central and Eastern Europe. INGKA Group's investment arm currently owns over 330,000 hectares of forest and completed its largest-ever forest land acquisition in the Baltic region.
Against the backdrop of this global transformation, IKEA China's recent store adjustments are seen as the most concrete and realistic manifestation of this strategic shift. On January 7, 2026, IKEA China announced that it would cease operations at seven offline stores in Shanghai Baoshan, Guangzhou Panyu, Tianjin Zhongbei, Nantong, Xuzhou, Ningbo, and Harbin starting February 2nd. Simultaneously, IKEA emphasized that local consumers could still shop via surrounding city stores, as well as omnichannel options including its official website, app, WeChat mini-program, and flagship stores on Tmall and JD.com. This "store closure" is not a simple retrenchment. IKEA China concurrently clarified that it is shifting its operational focus from scale expansion to precise cultivation, targeting Beijing and Shenzhen as key markets for the future, with plans to open over 10 new small-format stores within two years. Among these, the Dongguan store is expected to open in February 2026, while the Beijing Tongzhou store is planned for April of the same year. This adjustment direction aligns closely with the small-format and omnichannel strategy IKEA has been promoting globally in recent years. In fact, China has always been one of IKEA's key strategic markets. Since beginning procurement from China in the 1960s and opening its first store there in 1998, IKEA has gradually built a complete value chain in China covering product design, testing, production, procurement, warehousing, distribution, retail, shopping centers, and digital innovation. Currently, it reaches over 1 billion consumers through 41 offline customer touchpoints, three proprietary digital channels, and flagship stores on two major e-commerce platforms. IKEA China stated that this store structure adjustment is a significant step under its "Growth+" strategic framework, with the core objective not being short-term contraction but rather laying a more resilient operational foundation for the next phase of growth.
In conclusion, what IKEA faces today is not merely short-term operational pressure but a long-term test concerning the retail model itself. E-commerce platforms are relentlessly encroaching on traditional retail's core territory with speed, price, and scale, while IKEA attempts to find a new equilibrium between affordability, experiential quality, and long-termism. The crucial question is: as consumers' time becomes increasingly fragmented and purchasing decisions more instantaneous, does IKEA's experience, centered around "immersive store visits," retain sufficient appeal? The answer likely lies not in whether IKEA completely transforms into another e-commerce platform, but in whether it can redefine its own efficiency and value boundaries amidst the interplay of small-format stores, digitalization, and scale advantages. The rapidly evolving Chinese market may serve as a critical testing ground for this round of transformation.
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