Legacy Furniture Bohemoth IKEA, All In On AI
The 75-year-old brick-and-mortar store is spending how much on AI?
How does IKEA create value through AI? The 75-year-old retail behemoth is transforming from a clunky physical brand into one that naturally incorporates data into an enhanced customer experience, both in-store and online. Under the leadership of Chief Technology Officer Barbara Martin Coppola, Google alum, AI is at the core of IKEA’s mission of creating a better home-furnishing experience.
Owning the Technology
In 2019, IKEA acquired Artificial Intelligence and Augmented Reality startup Geomagical Labs to help improve its virtual home visualization tools. IKEA acquired Geomagical Labs just as top furniture companies including Wayfair, Pottery Barn, West Elm, Williams-Sonoma and Ashley Furniture were all investing in AR and AI visualization tools. Given that IKEA competes against digital-first organizations, some of which have no in-person presence whatsoever, IKEA’s investment in AI was aggressive and strategic.
The 2019 acquisition equipped IKEA with Geomagical Labs’s AI technology to launch a new generation of its IKEA Place app. The new version includes new features that combine Artificial Intelligence and Augmented Reality, which creates immense value for IKEA.
AI-Powered Furniture Shopping Experience
With IKEA Place, customers can virtually place true-to-scale models of IKEA furniture in their own homes. They can get smart home furnishing tips and recommendations based on curation, context – and even in-home behavior. The new technology allows customers to scan their rooms using their smartphone camera, then remove all the furniture and items in a digital 3D render. With a blank 3D render of any chosen room, customers can then experiment by virtually editing the room and placing new furniture inside. (IKEA’s privacy policy maintains that data gathered from photos and behavior in the home are secure.)
For example, IKEA Place users can point their smartphone camera at the corner of their living room. Based on IKEA home furnishing knowledge and behavioral data from all user experiences, the app will present the customer with product recommendations. The experience helps users to easily understand and visualize how, perhaps, a sofa fits into their living room, without entertaining an in-person visit to a local store. By marrying the in-person and digital experiences, IKEA augments the reality and brings the store to customers’ homes.
To provide another example of the value creation of AI at IKEA, users can also point their camera at any piece of furniture anywhere and be shown the most similar IKEA product instantly – this feature is not limited to the home and can be utilized anywhere. This means that the IKEA shopping experience effectively extends to encapsulate a customer’s whole life; it is boundless.
AI-First Strategy
CTO Coppola’s decision to acquire Geomagical Labs to supercharge IKEA’s visualization was shrewd. Through this acquisition, IKEA not only evolves with AI opportunities, but they own the IP and technology itself. She notes, “IKEA has spent more than $200 million investing in or acquiring 23 companies to date,” she said, “both to make a positive contribution to the sector and fulfill Ikea’s vision. This will continue to be the case. Acquisitions and investments will not stop and will increase.”
Many more AI-driven features are in the pipeline for IKEA. If there is one thing that is clear, omnichannel, or meeting the customer where they are, is the modern model for furniture-shopping, especially as the boundaries between brick-and-mortar retailers and online retailers blur.
Brand Risk
But with the brand embracing AI, there is one glaring risk: What is to come of the iconic IKEA brand? Worldwide, IKEA is a place for a fun day out with family. Kids can look forward to the in-person experience, playtime, and culture around building a better home life together. These are just some of the core elements of the brand that have kept IKEA in business for over 75 years. This brand story has remained robust even as tech giants have disrupted the space.
Historically, IKEA has not been associated with high-tech, never mind AI in their living rooms. Thus, the company should be careful not to isolate their base. They continue to focus on the people. In fact, the company is well aware of this risk, and it is taking steps to mitigate it, “In the bigger perspective, IKEA Place is not about AR or AI. It’s about making IKEA home furnishing expertise more accessible. To do so, we are looking into the newest technologies, not for the sake of technology, but to create a better everyday life for the many people.”
Recommendation
As IKEA considers organizational changes to achieve its aspirations, IKEA should be constantly engineering new and innovative ways to maximize their $200 million AI investments on their app and website. Perhaps there are features that could enhance the furniture rental experience powered by AI-sponsored data analytics. Perhaps AI customer service can make the chat feature more prominent to replicate the salespeople in brick-and-mortar stores. Given how much the company has invested in AI, IKEA’s AI future is limitless. The faster its digital transformation, the brighter it future. Having already embraced a digital-first model, this iconic furniture retailer is equipped to adopt AI-powered new features in IKEA Place with ease.
Sources:
Lunny, Oisin. “How Mobile Technology And Deep Learning Brings The IKEA Showroom To Your Home.” Forbes, Forbes Magazine, 6 Apr. 2020, www.forbes.com/sites/oisinlunny/2020/04/06/how-mobile-technology-and-deep-learning-brings-the-ikea-showroom-to-your-home/?sh=2f894fb498ad.
IKEA. “IKEA Sparks Home Furnishing Ideas and Inspiration through Artificial Intelligence.” Newsroom, 24 Sept. 2019, newsroom.inter.ikea.com/news/ikea-sparks-home-furnishing-ideas-and-inspiration-through-artificial-intelligence/s/77ed5adf-d6bb-4262-90c0-61b02821d04e.
Lunden, Ingrid. “Ikea Acquires AI Imaging Startup Geomagical Labs to Supercharge Room Visualisations.” TechCrunch, TechCrunch, 2 Apr. 2020, techcrunch.com/2020/04/02/ikea-acquires-ai-imaging-startup-geomagical-labs-to-supercharge-room-visualisations/.
Super interesting blog post. I’ve been using IKEA’s VR tech through another app they own called Room Planner, which lets you create a 3D rendering of your apartment / home and drop in furniture from not just IKEA, but also other brands. This has been incredibly helpful for me as I try to purchase furniture in advance of moving in. Assume they leverage an affiliate-marketing model, in which IKEA gets a commission on any third-party sales made through the platform.
It is great to see such an iconic brand adopt an AI-first strategy! It seems like other leading players in the space such as Wayfair have also launched similar features. Specifically, Wayfair introduced the “View in Room 3D” feature that also allows customers to visualize different pieces of furniture in their room. It is interesting to note that, unlike IKEA, Wayfair has chosen to develop the tool itself rather than through acquisition.
This is so interesting – thanks for writing! I have seen this type of thing before but have always been disappointed with the quality/ realistic-ness of it so I want to try this out. My boyfriend and I are hoping to buy a new place when we move this summer so this could be a really handy tool. However, I don’t think I’m interested in buying IKEA furniture, so I would probably use it just to space out rooms but then buy my furniture somewhere higher quality! Do you think that is a real risk IKEA faces or am I an outlier?
Interesting read! Through the acquisition of Geomagical Labs, IKEA created a competitive advantage but -as already mentioned above- not everyone is fully convinced of the IKEA-brand at every stage in their lives. As such, I am wondering whether it makes sense for IKEA to spin-out the technology and allow users not only to shop with IKEA but also with other furniture shops. This vertical integration might bring a new set of customer insights for IKEA and a new revenue stream as brands do pay a commission of their furniture is sold through the IKEA technology.
I have used the company’s augmented reality app that allows you to place virtual furniture in real-time in your very own house and think it truly is a game changer. They took one of the most common pain points of furniture buying, dimension taking and making sure the furniture will fit, and turned into a easy to use and very interactive experience for the user. The app, I am sure is also generating a lot of data that can feedback into the product design loop. This certainly changed my perception of IKEA as a legacy furniture store to a futuristic cutting-edge company.
Very interesting post! Besides helping with product recommendations, I wonder how these images/videos from customers could also provide IKEA with design/product insights or even help the company to understand market trends.
Thanks for the post! I always find it fascinating when big traditional companies put new technologies at the core of their value capture strategy, and it was indeed smart to acquire these capabilities externally rather than developing them in-house.
I do not necessarily see the fact that IKEA can be associated with high-tech as a big risk. I really wonder, however, if that initiative is efficient at capturing more new customers as opposed to enhancing the customer experience of people that would have bought their furniture at IKEA anyway.
Great article Cristina! Like you mentioned, IKEA has leveraged the image recognition angle in AI. what do you think about their potential to build recommendation engines for furniture? having analyzed enough interior design images and items from its catalogue do you think they could recommend an entire room’s layout for customers based on budget, availability etc?
Do you think that AI / ML will be utilized to evolve the in-store shopping experience or remain an at home experiential feature? Since IKEA shopping on location is such an experience – how do they keep it fresh without infringing on their traditional value proposition?