Exclusive Interview with Florian Mellet, Market Leader of IKEA in Ukraine
Text by Tetiana Khomiak
Two years ago, IKEA officially confirmed its intention to open its first store in Ukraine. However, this spring, in the midst of the coronavirus pandemic, the company has decided to take another approach and launch online sales first. From the first day, customers have been facing issues when placing orders. What happened, why was IKEA unable to cope with the demand?
I am happy to inform that we are now ready to fully meet our customers’ demand, as within two months we have more than doubled the capacity of our online store. Over the last two years, we have been working hard to make possible IKEA’s market entry in Ukraine. This included work on product specifications and their adaptation as well as finding the right partners with whom we could launch our business in the country. All this allowed us to start sales through the online store, and this is just the beginning of our story in Ukraine.
When we launched in early May, the number of orders exceeded our expectations by several times. On the one hand, we were very happy to see this, because this confirmed the potential of the Ukrainian market. On the other hand, we had to immediately start working with our partners to meet all this demand. We added new modern scanners to improve processing speed; we also started looking for additional employees and adapted our plan in Ukraine. For example, when we entered the market, we had only two Pick-Up Points, now we expect that two more will open before the end of the year.
We also adjusted our plan to hire additional staff. Right now, we are functioning essentially like a startup, but we have significant ambitions to expand our operations in the Ukrainian market. We are looking for people not only to support operations of the online store, but also to prepare for physical store launch in Kyiv. This week, we are opening around 100 additional vacancies for our future store and pick-up points. We are looking forward to welcoming our new colleagues, and I would like to once again invite anyone who is interested to apply. We take pride in giving equal opportunity to every applicant while making sure that we work in diverse and gender-balanced teams.
IKEA is often criticized for its slow market entry process, compared to local players who are much more flexible and take decisions regarding expansion a lot faster…
We have spent about two years studying not only the market, but also local laws and regulations to make sure that our products are fully compliant with them. IKEA has very strict internal rules to ensure that we operate in full compliance with both local and international requirements.
What difficulties is the company facing in Ukraine in terms of business development?
As I’ve said, IKEA pays a lot of attention to working in strict compliance with local laws and regulations. We have looked in detail at all aspects of our work together with Ukraine’s government officials. Thanks to the fact that we structure our market entry, we do not have significant difficulties.
How has the COVID-19 situation affected the company's operations globally?
We have seen a boom in online sales all over the world. However, as soon as we reopened our stores, people rushed to them because they needed to touch and see our products. That is why we see great potential for combining online sales with physical stores. The store is very important for our business concept, especially in the Ukrainian market. I have noticed that in Ukraine, new furniture is selected at so-called “family councils”, where each family member can comment on his or her wishes, and decisions are taken collectively. In this situation, physical stores are very important. On the other hand, online sales help make our range of goods available to people across the country.
Where will IKEA’s new Pick-Up Points be located?
Today, we have two Pick-Up Points– one at Auchan Rive Gauche mall and another one at Metro Cash & Carry. We strive to cover the entire city with our Pick-Up Points as much as possible. I can't say exactly where the points will be located at this time, but they will complement the two points we already have. IKEA strives to be as close as possible to every customer in Ukraine, and accordingly, Pick-Up Points will be located at places with the largest concentrations of people.
Kyiv is the seventh largest city in Europe, and it is our door to the whole of Ukraine with its population of over 40 million people. That’s why we want to get to know this market better. We are now studying where we need to be in Kyiv to be as close as possible to the many people. We have started our operations with e-commerce because it is the easiest way to enter the market in this specific situation related to COVID-19, as well as the safest way for both our customers and employees.
Thus, Ukraine has become not only the first market where IKEA began its entry with an online store; it’s also one of the first markets where we will launch our modern city store format, which is more suitable for large cities. We have recently opened one in Shanghai, similar stores have been opened in Paris and Warsaw, and very soon one will open in Kyiv.
What are the initial sales results of IKEA’s online store in Ukraine? What types of goods are the most popular among Ukrainians and how do consumer trends differ from our neighbors – for instance, Poland?
We are very happy with the sales; Ukraine is an excellent market for our company. Before officially launching our online store, we conducted numerous home visits here in Ukraine to better understand the living habits of the many people, their preferences, needs, and desires. For example, we learned that due to limited living space, about 50% of Kyiv residents sleep in their living rooms, which told us that there is great need for creative storage solutions. We used these findings when adjusting our initial range offer for Ukraine – around 3,600 items, covering all colors and designs. We have seen success in all product groups, however, solutions to Ukrainian’s biggest issue – how to store things at home – are the most popular. Storage solutions, from simple boxes to cabinets to our modular PAX range, have been very successful. Accessories, especially for the kitchen, are also very popular. These are the products that Ukrainians have been expecting for a long time.
Can you name the average order and the volume of sales for this period of rather limited operation of e-commerce in Ukraine?
We do not usually share data related to our operations. What I can say is that we have been very impressed since day one, both in terms of the number of orders as well as the number of products in each order. Ukrainians usually do not look for a specific product, but buy many products at the same time, which means they are looking for comprehensive solutions to improving their living space.
Will the number of products available in the online store increase?
We plan to expand the offer to more than 5,000 items. We are actively working to eliminate all existing gaps in the online store operations. We are already working on the expansion and planning to make these products available by the time we open the physical store in Kiev. In fact, we want them to become available to customers even faster.
This is the selection we have identified for the needs of the Ukrainian market. The city store format is slightly smaller than a classical IKEA store, but it is much more accessible for people who use a car, public transport or even arrive on foot. This is the selection of products that is suitable for this store format.
Is this range of goods a temporary or final decision for the Ukrainian market?
We as a company see significant potential in the Ukrainian market. If you asked Kyiv residents where they buy household goods and furniture, IKEA would be in second place. This was back when we had not yet entered Ukraine. We understand the customers’ high expectations. We are at the beginning of our journey in Ukraine and plan to invest more and more to offer all IKEA products in Ukraine.
How is the company planning to improve the online shopping experience for Ukrainians? Will the company launch a mobile application, for example?
We have invested and continue to invest in expanding our capacity and improving the shopping experience. Ukraine became one of the first countries in the world for IKEA to receive the new web platform. As a resident of Kyiv, I can also see how fast Ukraine is developing in terms of IT innovation and digitalization. Indeed, many of our customers buy not only from tablets or computers, but also directly from their smartphones. Therefore, our website is already adapted for mobile phones. On the global level, IKEA has developed an application that is currently being tested in several markets. I can't say when exactly it will be available in Ukraine, but our ambition is to have it here as soon as possible.
Has the company already started renovations at the future physical store location in Ukraine? Tell us what it will look like.
We are currently focused on launching the first city store at Blockbuster Mall in Kyiv. As mentioned, this week we are opening 100 additional vacancies for employees and team leaders of this store and future pick-up points. We have already found and trained some of them, while some are still in the process of training. We will increase their number gradually to prepare all these people for the opening of the store at the end of this year.
The total area of the store will be more than 5, 000 sq. m. Its main innovation is probably the combination of accessories and furniture in one installation. The way people will move around the store and view the goods will be significantly different from the typical big IKEA store. However, this is a unique store format where people will be able to buy goods directly as well as order them for pick-up later at the store, or have them delivered to their home or one of the Pick-Up Points. Therefore, there will be many options to access the goods. There will also be many digital solutions at the store.
Will the store have a cafe with your famous meatballs?
The city store in Kyiv will launch without a food section or restaurant, but we strive to launch them as soon as possible. We have recently opened two important vacancies: Food Manager and Business Analyst for the food market. These people will help us open the cafe and make our food accessible to everyone.
I am French and food is very important for me. Moreover, I have been working at IKEA for 8 years and I understand how important food is for the concept. I worked as a store manager in Toulon in the south of France and it was one of the best IKEA stores in terms of food. IKEA founder Ingvar Kamprad often came to visit us, and he always went to the store's restaurant. He used to say that people buy less on an empty stomach than they do on a full one.
Unless it’s a grocery store… J So, does the company plan to expand to other cities with physical stores or Pick-Up Points?
The company's development process in Ukraine never stops. We see significant potential in large Ukrainian cities, such as Kharkiv, Kyiv, Odesa, Dnipro, and we continue analyzing opportunities there. But we also see the interest of people living in smaller cities to have access to IKEA products.
What is the company's strategy for developing its physical network? Does IKEA aim to saturate the Kyiv market, and then – to go to the regions? Or will these processes happen simultaneously?
Our strategy is never to saturate a single market, because we see potential of the whole market and try to work there in the best way. Of course, we are currently concentrated in Kyiv with e-commerce, but we provide delivery opportunities for people living outside the capital. I cannot reveal the expansion plan now, because we are only at the beginning of our journey, but of course we are trying to realize Kyiv’s potential.
How many lease agreements has IKEA signed so far to open physical points?
To date, we have signed three agreements: two for Pick-Up Points with Metro and Ceetrus at Auchan Rive Gauche, and a third one – with Blockbuster. I'm currently working with a team to develop a plan for maximizing the market's potential. These plans will require additional investment and locations.
So the company is now developing a new plan, which will include next steps for the company’s development in Ukraine? How long will this process take place? Will the company define its further development only after this plan is adopted? Or are these simultaneous processes?
I think it is very important to understand the environment in which we are living now. The whole world, Ukraine as a country, Kyiv as a city are moving and changing with extraordinary speed. No one could have foreseen the changes brought by the COVID-19 pandemic. Flexibility and adaptability are our main characteristics. We are constantly adapting and working on several issues simultaneously. We are currently working on a 6-month plan, a one-year plan, a two-year plan and more. And of course we are constantly adapting them. The situation with COVID-19 has also added several considerations to our plan.
One of the integral parts of IKEA's work abroad is providing individual solutions for households as well as the B2B segment. Is the company working on implementing such services in Ukraine?
Within the very short time of the pandemic, we have seen how people's work changed; many moved from physical offices to home offices. And we are the right company to support people during this transition period. We see the potential for B2B development in Kyiv. Restaurants with new design solutions are developing rapidly; we are also seeing a hotel boom. We have a company that specializes in furniture and design, and we plan to work not only with individual buyers, but also with business customers. We focus on being accessible to all customers – individuals, companies, private entrepreneurs, restaurants. In particular, we are making available our modular products, which work for both small and large spaces.
Will the company implement the IKEA Family loyalty program in Ukraine?
Loyalty programs such as IKEA Family are very important to us. We strive to develop relationships with our customers to better understand their needs, to make them happier with the best deals. Today, the online store provides a warranty on the products, the ability to return an order and contact the support center. This is the basis, from which we plan to develop a full-fledged loyalty program when we launch a physical store.
What are your impressions from working and living in Ukraine?
To be frank, I was ready to work abroad, but Kyiv was not the first city on my list. When I moved here in July two years ago, I was completely unfamiliar with Ukraine or Kyiv. I was truly impressed by the dynamism of this city, how deep its cultural roots are. It is dynamic not only in terms of living, but also in terms of retail, sales and business in general. It is very nice to live here with a family, the city is very green, it has parks and places to walk. As a French person, there is nothing I or my family miss here compared to France. Of course, these are my personal impressions as a French person with a good income in Kyiv. There are many people in Ukraine who face problems in everyday life, especially in the recent years. I hope that IKEA will be able to help such people at least in terms of organizing comfortable living space. I hope that we will be able to offer such solutions and be affordable and accessible for the many people in Ukraine. And I am ready to work hard on this, because, first, I love IKEA, and second, I have learned to love Ukraine.