Ikea Canada leaning on automation as it overhauls fulfilment network: new CEO

TORONTO — When people north of Toronto visit Ikea’s store in Vaughan, Selwyn Crittendon says it will be hard to tell there’s a transformation underway in the bowels of the building, away from the maze-like aisles leading customers through the showroom.

It’s in those hidden spaces that the Swedish home goods and furniture retailer is installing dedicated loading bays so staff don’t have to wheel orders out a side door and lift them onto trucks, said Ikea Canada’s chief executive officer and chief sustainability officer.

“From a consumer perspective, you won’t notice so much of the change,” said Crittendon, who has spent roughly three months on the job he took after about 20 years at Ikea US.

But his hope is that shoppers and staff eventually notice the effects of the invisible changes as orders arrive faster and take much less grunt work.

The store’s transformation is only one of the initiatives the company has underway to boost efficiency across its supply chain. Other stores will get the same revamp as Ikea Canada pours $400 million into overhauling its fulfilment networks in the Greater Vancouver and Toronto areas.

That builds on a recently opened warehouse in Beauharnois, a southwestern Quebec city, Ikea recently opened.

The Beauharnois facility is the first Canadian distribution centre Ikea opened in the last 30 years — and it’s quite different from those that came before it.

That’s because the facility is abuzz with automated systems that deliver palettes of goods from up to 20 levels high to workers who handpick items and sort them into orders.

“What they’re doing in terms of number of orders that are pumping out of that distribution center is simply amazing,” Crittendon said.

Across Ikea’s entire Canadian network, 1.61 million orders were delivered between September 2022 and August 2023. Another 602,260 orders fell under the company’s click and collect program, which allows customers to browse and buy online but pick up their purchase in store.

The company said about 28 per cent of its retail sales come through its online channels.

But convincing customers these days to make purchases can be a tougher sell. High inflation and interest rates are weighing on shoppers, including many who have lost their jobs through a spate of layoffs or are worried about costly mortgages cutting into other areas of their budget.

“Between our co-workers and our customers, they’re screaming about affordability,” said Crittendon.

“It’s really, ‘How much money do we have after we pay for the things, whether it be our housing, our groceries, do we have discretionary spending then?”’

Though Ikea has long had a reputation for prices that undercut competitors, Crittendon said the company’s approach to affordability “is not about just selling goods.”

Instead, he sees Ikea’s place as finding solutions to pocketbook problems. That means selling everything from motion-sensing taps and LED lightbulbs that save water and electricity to designing more products that fit into micro-condos and other small spaces Canadians are fitting into to make real estate affordable.

Helping with affordability also includes offering more robust financing options on purchases.

The company has a deal with buy now, pay later company Afterpay that allows shoppers to split purchases valued between $50 and $1,000 into four interest-free payments. There’s also a new program backed by RBC that offers one-year, zero-interest loans.

The focus on affordability helped Ikea Canada earn $2.9 billion in its latest fiscal year, up 10.9 per cent from the prior year. It was coupled with store visits increasing by 6.3 per cent to 28.6 million.

Among those heading to stores was Crittendon, whose first act in Ikea Canada’s top job was to visit all 16 stores in the chain’s Canadian network.

He wanted to find a round of “homework” — changes he could order to better support Ikea Canada’s 7,200 staff or ease the pain points shoppers face.

Getting schooled on their needs took him to the hulking spaces Ikea was first known for along with its newer gems: condensed urban stores like the one in the heart of downtown Toronto. They feature less stock and smaller showrooms but keep shoppers from trekking to larger, farther locations.

Asked whether Ikea Canada will focus on adding more of these types of stores to its network, Crittendon said it isn’t about prioritizing one kind over another.

“My curiosity is more about, what does a customer need? … It could be our standardized stores that you’re so used to like (Ontario’s) Ikea Burlington, Vaughan, Etobicoke and North York, or it could be smaller footprints like the stores Ikea Scarborough and Ikea (Toronto Downtown),” he said.

“But I think in the future, I’m going to spend a lot more time understanding what our consumers’ needs are.”