Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How IKEA Pivoted From Catalog to Digital Ecosystem
Transcript
- Lucas: So in 2021, IKEA did something that would have been unthinkable just a decade earlier. They killed the catalog. Luna: The one that used to show up in 200 million mailboxes worldwide? That catalog? Lucas: Exactly the one. For context, at its peak, the IKEA catalog was the most printed publication in history — more than the Bible in most years. And they just stopped it. No farewell edition. No transition to digital-only. Just gone. Luna: That feels like a huge gamble for a company that built its entire brand around that thick booklet. How did they manage that without losing the customer base? Lucas: Well, it wasn't a snap decision. The company had been quietly testing digital sales channels since the late 2000s. But the real trigger was a fundamental shift in how people shop for furniture. By 2020, over 60 percent of IKEA's customers were researching online before visiting a store, and about 15 percent of total sales came through e-commerce. Luna: But that's still a minority. The catalog was still their biggest marketing spend. Why not keep both? Lucas: Because the catalog was becoming a liability. Producing and distributing 200 million copies costs hundreds of millions of euros annually. And it wasn't driving traffic the way it used to. The return on investment had dropped significantly year after year. Plus, the data showed that digital channels were growing at 20 percent annually, while catalog-driven visits were flat or declining. Luna: So they redirected that budget into digital. Smart. But what about the in-store experience? The catalog was also a planning tool for customers. Lucas: They doubled down on a tool they'd actually launched back in 2017 — the IKEA Place augmented reality app. You point your phone at a spot in your living room, and it renders a 3D model of the sofa or bookshelf at actual scale. By 2023, the app had over 30 million downloads and was driving measurable conversion lift — customers who used the AR feature were 40 percent more likely to make a purchase. Luna: Forty percent — that's huge. But an app can't replace the tactile feel of sitting on a sofa. How did they handle that? Lucas: They didn't try to replace it entirely. Instead, they reimagined stores as experience centers. Smaller formats, urban locations, with less inventory on the floor and more focus on design consultation. The big-box stores in the suburbs still exist, but the new urban stores — like the ones in Paris and Tokyo — are about a third of the size and act more as showrooms with same-day delivery from nearby micro-warehouses. Luna: That logistics piece is key. IKEA used to ship everything from giant warehouses on the outskirts of cities. Now they have these distributed micro-warehouses closer to customers. How much did that change the cost structure? Lucas: Dramatically. In their fiscal year 2025 report, they cited a 15 percent reduction in last-mile delivery costs. And delivery times went from an average of five days to under 48 hours in most major metro areas. That's not just a convenience improvement — it directly competes with the speed that Amazon has conditioned everyone to expect. Luna: And they didn't build this all in-house. They acquired TaskRabbit in 2017 — the platform that connects people with local handypeople for furniture assembly. Lucas: Right. That acquisition was controversial at the time — IKEA had never bought a tech company before. But it solved a huge pain point: customers hated assembling furniture. By integrating TaskRabbit into the checkout flow, IKEA could offer assembly as an add-on service. And that service became a revenue stream in its own right, generating over 500 million euros in 2024. Luna: So the pivot wasn't just digital — it was about the entire customer journey, from research to assembly. But let's go back to the catalog decision. Was there any internal resistance? Lucas: Huge resistance. Jon Abrahamsson Ring, the CEO of Inter IKEA, said in interviews that some longtime employees felt the catalog was the soul of the company. Marketing teams had built their careers around it. But the board was convinced by the data — not just the declining ROI, but also the fact that the catalog's environmental footprint was enormous. 200 million copies means a lot of paper, ink, and shipping emissions. Luna: Sustainability was a factor too. IKEA has those big climate goals — aim to be climate positive by 2030. Cutting the catalog saves something like 150,000 tons of carbon dioxide equivalent annually. Lucas: Exactly. So it became a triple win: save money, reduce emissions, and force the organization to invest in digital. But the key detail here is that they didn't replace the catalog with a digital version. They replaced it with a suite of digital tools — the app, a redesigned website with better room-planning features, and personalized recommendations based on past purchases. Luna: That's a really important distinction. A lot of companies try to just digitize the old product — like putting a PDF of the catalog online. IKEA instead rethought the function: the catalog's job was to help you plan your space. So they built a tool that does that better than any booklet could. Lucas: And it paid off. E-commerce as a share of total revenue went from about 11 percent in 2019 to 25 percent in 2025. That's still a minority, but it's growing fast. And overall revenue reached 47 billion euros in fiscal year 2025, up from 41 billion in 2020. Luna: There's a lesson there about not holding on to legacy assets too long just because they're iconic. But also about not making the pivot too early — IKEA waited until the digital infrastructure was actually ready. Lucas: Right. They didn't kill the catalog until they had the AR app, the micro-warehouses, and the TaskRabbit integration working. It was a sequenced pivot, not a sudden jump. And that sequencing is really what made it work. Luna: Yeah, that's the part I think other businesses miss. They see the headline — 'IKEA dumps catalog, goes digital' — and think it's a one-time decision. But it was years of preparation. Lucas: Let's zoom out a bit. I think there's a broader pattern here about incumbents and disruption. IKEA is a 70-year-old company, family-controlled, with a very strong culture. They were the classic candidate for disruption by some nimbler digital-native furniture company. Luna: And yet, none of those digital-native furniture companies really took off the way people predicted. Remember all those Silicon Valley startups trying to sell sofas online? Most are gone or struggling. Lucas: Exactly. The lesson might be that incumbents with physical infrastructure — stores, warehouses, logistics — can actually digitize faster than pure plays can build physical infrastructure. IKEA already had the supply chain, the brand trust, and the customer base. They just needed to add the digital layer. Luna: But not every incumbent can pull it off. What made IKEA different? Lucas: I think it's the humility to admit that the old model is dying, combined with the willingness to cannibalize your own revenue streams. The catalog was still generating some sales, but they killed it anyway. They were willing to let go of a piece of the business that still worked, because they knew it wouldn't work forever. Luna: That takes real guts at a family-owned company where legacy is deeply valued. It's not like a public company where you can blame activist investors. Lucas: And it's worth noting that they didn't fire all the people who worked on the catalog. Many of those employees were retrained for digital roles. That preserved institutional knowledge. The person who knew how to photograph a sofa for the catalog now works on the AR content team. Luna: That's a nice detail. So the pivot wasn't just about technology — it was about people, too. Lucas: One thing I want to mention before we wrap — we've been doing this show for a while now, and if these conversations have moved your work forward in some small way, a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo. That's literally what makes producing this many episodes possible. No ads, no sponsors — just listeners who find value here. And if that's you, thank you. Luna: Yeah, it's a small group, but it keeps us going. We're grateful for every bit of support. Lucas: Back to IKEA. One last piece — I think the most underappreciated part of the pivot is what they did with data. For decades, IKEA didn't know who bought their furniture after they left the store. The catalog was a broadcast, not a conversation. Now, with the app and online accounts, they have direct relationships with over 50 million active users. Luna: That's a massive shift. They went from being a retail store to a platform. And that platform lets them do personalized recommendations, targeted promotions, even predictive inventory planning. Lucas: And think about the competitive moat that creates. A competitor can copy the AR app, they can copy the micro-warehouse model, they can even copy the assembly service. But they can't copy the 50 million user profiles and the decade of purchase data IKEA now has. That's the real asset. Luna: So the pivot was ultimately about moving from product-centric to customer-centric. The catalog was about selling sofas. The digital ecosystem is about understanding people. Lucas: That's a perfect way to put it. And it raises a question for any legacy business listening: what's your equivalent of the catalog? What asset are you holding onto because it feels sacred, but that's actually preventing you from building a real relationship with your customers? Might be worth asking. Luna: I think that's a good note to end on. IKEA's story shows that even an institution can change — but you have to be willing to let go of the thing that made you famous. Lucas: And have the patience to build the replacement before you pull the trigger. Thanks, Luna. Luna: Thanks, Lucas. See you next time.