Live from Shoptalk Europe: Parag M. Parekh, Co-Chief Digital Officer at IKEA

This episode of the RETHINK Retail Podcast was recorded live from Shoptalk Europe.

Hot off the stage from his June 8. keynote, Parag M. Parekh, co-chief digital officer at INGKA Group, the largest IKEA franchisee, stopped by the RETHINK Retail podcast booth to chat with host Gabriella Bock.

During their discussion, Parag shared how IKEA’s rapid digital transformation story since the COVID-19 pandemic as well as the company’s goals for creating a more sustainable product and business model. According to Parag, “doing good is good business.”

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TRANSCRIPTION

Gabriella Bock:
Hello, and welcome back to the RETHINK retail Podcast. We are live from Shoptalk Europe, here at the RETHINK retell booth, and joining me today is Parag M. Paraekh, Co-chief Digital Officer at Ingka Group, which is the largest IKEA franchisee. Parag, thank you so much for joining the show today.

Parag M. Parekh:
Thank you so much, Gabriella. It’s a pleasure.

Gabriella Bock:
It’s a pleasure to have you here. And so I know you are hot off the stage here at Shoptalk. You literally got off the stage, and booked it over here, so I do appreciate you stopping by. I did want to know, what were some of the big trends that you’ve been hearing discussed at the show so far?

Parag M. Parekh:
I think first up, it’s a big pleasure to be back to these events. To be able to meet up your friends from other retailing community, to be able to meet up with vendors, and to take a look. So I think that’s been probably one of the biggest highlights for the visit today. And it’s literally happening after two, two and a half years, so the first event of the press. I think super interesting insights this morning from the zeitgeist when they summarized the trend, and I think they are bang-on to trends that I clearly see happening. Of course, one in the supply chain industry, and all of the innovations that need to happen to be able to address the challenges we have today in the supply chain, but also with regards to the Lastmile.

Parag M. Parekh:
And the second trend which I also sort of feel coming through is the whole move from being only customer-centric focused, ie being only focused on customers, but that definition is slowly changing to saying, more human-centric. How do we bring our employees into that definition, our co-workers into that definition? How do we bring the society, the community into the definition? And, more importantly, the planet. How do organizations start talking about inspiring the customers with a sustainable lifestyle? So the whole move from customer-centricity to human-centricity. I also feel that emerges through the presentations today.

Gabriella Bock:
Absolutely. I know you just spoke on a panel on delighting customers through personal interaction, I think it was? How would you define that, and how would you describe that? What would be some examples of that?

Parag M. Parekh:
I think it goes back to the… I just spoke about customers today. We have been, from a experience perspective, retailers have been talking about moving from transactional to inspirational, expediential retail. I think that’s been a trend for the last two decades. And with the customer-centricity at the heart of everything they do. But as we move, there is the need to bring the broader society, to bring sustainability, and a care for society and the planet at large into our oral discussions with the customer.

Parag M. Parekh:
Because, as you start looking at the next generation of customers, this is center to what they are asking for. And as brands, and as organizations, there is a responsibility for us to start showing up, and start having these themes at the center of it. And how do you start then, not only looking at customers from a transactional or from a commercial aspect, but really bringing in emotions, the humanity, into how you work and how you deal with them. It is also about, how do you… the world is playing out with very different inequalities. How do you drive equality, and how do you create a better life for, especially in IKEA’s case, a better life at home, for the many people

Gabriella Bock:
Absolutely, yeah. That’s becoming increasingly more important, especially to consumers, especially younger consumers as well. How we are sourcing our products, how we are treating our employees, and the impact we are leaving on the world around us. So, I’m going to read off the next question because it’s quite long, so just one second.

Gabriella Bock:
Parag, it’s often noted that COVID-19 has accelerated digital trends. According to a new McKinsey global survey of C-level executives, companies have accelerated the digitization of their customer and supply chain interactions and of their internal operations by three to four years cited. So I did want to know, have you fel this in your work, and do you think that the three to four years is accurate?

Parag M. Parekh:
I would agree with that callout, and absolutely yes. Depending the majority of your organization prior to pandemic, I would even have said in some cases it’s probably twice. I always keep saying the pandemic has brought the future into the present for many organizations. At IKEA, we were well into what we call a “digital transformation,” since 2018, and this was when, all of a sudden, from one day to another, 90% of stores were closed. And since IKEA is in the business of creating better life at home for many people, all of sudden we were at the forefront of making sure that customers, who are now bound to their home, and we are able to reach out. But at the same time, 90% of our stores are closed, and all of a sudden IKEA Digital was the single point of outreach for our customers to reach, and for us to help them, to their asks and their demands.

Parag M. Parekh:
And, through the pandemic, we literally have seen that, thanks to the transformation we had kicked off, we were able to successfully transform from being a broadly physical retailer to being an online retailer. And as we came out of the pandemic, almost 27% of our global revenue started coming from our online business. Just to put it into perspective, just three years prior this was 7%. So from 7% in FY ’18, to 27% in FY ’21. And that’ the shift we have seen. And of course we are super proud that we were able to stay true to our purpose of being able to reach the many customers, the many people, through affordable furniture, even when pandemic had all of the challenges at us.

Gabriella Bock:
Yeah. I imagine you were selling a lot of set-ups for home offices and at-home studying and learning?

Parag M. Parekh:
Absolutely. And it was clearly, as we ran through the pandemic, we saw a lot of detail coming through. We saw homes being transformed into work offices, into schools. And all of a sudden, we had to make sure that we are able to meet the cost for the customers, to be able to transform homes into these different set-ups. In many cases it was reading this demand, understanding where our inventory sits, figuring out that how we can all of a sudden, overnight, start transforming our closed stores into physical units, fulfillment units, and start shipping some of our products to our customers through this. So it was all about testing, learning, trying, all our schedules from one day to another went out of the window, we had to cross-functional teams together, and really, there was no playbook. And it was all about figuring out as we go.

Gabriella Bock:
Absolutely, being agile, and just rolling with shift.

Parag M. Parekh:
Absolutely. And we have come a long way from where we started, and the good news is the transformation has helped us, in a sense, to continue with changing and adapting our business model to creating a better life here for tomorrow.

Gabriella Bock:
So, lets talk about that. Let’s talk about some of the digital transformations that are currently under way at IKEA.

Parag M. Parekh:
So at IKEA, we have what we call the “digital strategy for income.” This was something, like I said, started in 2018, but we had a relaunch of that again in ’21. And largely we talk about, at the heart of it. How do we create a better life at home for the many people? This is at the heart of our purpose, and this is the driving force. And then we have four critical pillars which support this mission. And it starts with, how do you drive a different customer experience? From not having any online presence, or a very minimal online presence, we had to change how we can connect with our customers. And this was the first pillar of really building the right experiences online, be it our app, be it our wrap, or very recently also bringing these digital capabilities into our physical big blue boxes. The second pillar was everything around, how do we empower our co-workers? The experiences with the customer can seriously be enriched when you can bring your co-workers to focus their time. And this is all about giving them the right tools to be able to focus on our customers, and helping them out.

Parag M. Parekh:
The third has been about creating modern foundation. IKEA is a company with ideas of history. And over the years, they have built a lot of legacy in grown platforms, which have helped them flourish. As we come into the new age, either there’s a sunset, or there’s a change to unwrap what we call the “spaghetti landscape.” So the third is really focusing on building the modern foundation, which will help us to create an IKEA of the future. But all of it encompassed under what we call “leading with the digital Lienen.” It’s not only a certain group which is responsible, but it’s the entire organization which is responsible for owning the transformation with the people and the co-workers at the heart of it.

Parag M. Parekh:
So those are the four pillars which have been responsible. To give you very concrete examples, while we see the transformation online in our app, more recently if you visit an IKEA store, you will see what we call “Shop & Go.” You walk through the IKEA stores, you use the in-store version of the app, you are able to scan articles, put it into your basket, not wait in long queues, but really check out at Shop & Go in a very mobile way. You will see what we call a “kiosk.” In the past, if someone visiting our stores had some challenges in regards to figuring out co-workers to reach or information about the product, there was quite a waiting time until you find the co-worker. But its all about now, how do we enable that to the sense of this kiosk, which uses the same technology from our online platform, into our stores. We have tons of other things which are happening, be it bringing intelligence in terms of staff planing, be it making sure that we have the right backbone for order-to-cash capabilities for our talent and learning platforms. We literally are almost changing everything as we speak.

Gabriella Bock:
So it sounds like innovation is definitely woven throughout the culture of the company.

Parag M. Parekh:
Absolutely. As a company, if I look back through our history, entrepreneurship was built and woven into the fabric of the company, and this is something that we also bring into as we move into the future. Historically, we have a saying at IKEA, “Love your past, create the future.” Historically, what you hear about the flat-pack, this was something [inaudible 00:13:11] invented at IKEA, and IKEA was one of the leaders in terms of redefining the stores to actually become fulfillment units. This is something that IKEA did 60 years ago, and that entrepreneurship is helping us as we go into the new age to say, how do we take some of those learnings, bring that digital DNA into the new world and shape experiences in a very unified [inaudible 00:13:39].

Gabriella Bock:
Absolutely. And as we look toward the future, what do you envision as the future of IKEA?

Parag M. Parekh:
This was one of the topics we did share. What the pandemic has provided us a lot of inputs, and we have what we call a “life at home report” that says a lot of the customers are spending a lot of time at their home. Home is their sanctuary, is their place where they go to relax, retreat. But as life continues, there is a need that they are looking for more help. While digital makes life easier, everything going around is still where they need help with, and as IKEA, we are starting to look at, how can we help our customers in their life at home? And by that definition, we are saying, probably there is an opportunity to help them not only with regards to home furnishings, which is our court, but there are opportunities for well and beyond.

Parag M. Parekh:
To give you very concrete examples, IKEA is now invested into Ikano Bank, which then enable us to provide financial services and make our furniture accessible, and provide help in an affordable way to the many people. IKEA has had started selling solar panels, and we are now experimenting in certain markets, notably Sweden, to say how can we start providing green electricity to the homes where we already have access in the first place.

Gabriella Bock:
Wow, that’s fantastic. Wow.

Parag M. Parekh:
IKEA has a promise to its customers and to the planet that we will be a circular business by 2020. And to be able to do that, we have to fundamentally change our business model, and we have started with the first steps in that direction to say, how do we allow for customers to bring back their old IKEA furniture, they bring back into our stores, we either circulate them, or when we feel that this has a second life, give them a second life, and provide it to the many people. So this is some of the ideas where IKEA is experimenting beyond the home furnishing business to start looking at life at home for the many people, and really driving a positive impact for its people, but the broader community and the planet at large.

Gabriella Bock:
That’s fantastic, and it’s wonderful to hear that you’re focusing on repurposing and circular strategy. Because I know, probably so much easier to just, if your table breaks, have your customer… You’re making more money if they have to come and replace that product. So, it’s really seemingly about making sure that items aren’t ending up in landfills and really committed to that promise that I know you guys have. You’re not green-washing, is what I’m trying to say. You’re really actually doing the things that need to be done, even if you might see a reduction in replacement sales. But instead it’s about, leaving an impact, a good impact.

Parag M. Parekh:
We keep saying, as an organization, organizations can’t shy away from some of the biggest challenges the world faces in general. The challenge we face around sustainability is one of probably the biggest challenges this decade. It’s necessary for organizations to wake up, own the responsibility, and meaningfully, together, inspiring the customers, figure out a part from it. And this is where I think there is a responsibility for us as a business to be able to do that. And there might be a shorter view, but in the longer term, being good is good business. And it helps built the right relationships, and is the right thing to do.

Gabriella Bock:
Absolutely. Being good is good business. I love that, I think that’s a good note to end on. So Parag, I really want to thank you for your time and stopping by, I know you’ve had a busy day. It’s been a pleasure to chat with you.

Parag M. Parekh:
Thanks a lot, Gabriella. It was a pleasure.

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