Product, Service & Design Innovation
'Peak Stuff':
Why IKEA Is Shifting Towards New Business Models

Last month, IKEA’s Chief Sustainability Officer, Steve Howard, raised eyebrows at a panel debate by suggesting that in some parts of the world we have reached the point of ‘peak stuff’, a comment that was interpreted by some as a warning that consumer appetite for home furnishings had reached a crucial turning point.

At the SB’16 Copenhagen preview event in the Danish capital last week, Jonas Engberg, IKEA Denmark’s Sustainability Manager, spoke in an exclusive interview about the concept of ‘peak stuff’ and outlined how IKEA’s exciting new business strategy better reflects a shifting consumer landscape and offers greater security for the brand.

“Steve Howard’s comment was perhaps taken a little out of context,” Engberg explained. “When we draw comparisons between ‘peak stuff’ and peak oil, we don’t mean in a practical sense. We are running out of oil and we’ll see a corresponding decline in oil consumption. We’re not expecting to see a decline in the consumption of tables and chairs. In fact the opposite is true — in emerging countries, we’re seeing a growing need for furnishings, for housing, for things that IKEA can provide.”

“What we mean by ‘peak stuff’ is that we live in a world of finite resources and we recognise that consumption needs to reflect this. At IKEA, we are therefore seeking new ways to meet people's needs and aspirations whilst staying within the limits of our planet.”

Engberg outlined that as far back as 2012 IKEA has been trialling strategies to reduce consumption of its products, such as pledging to stock only extended lifespan LED lightbulbs in stores by 2016. That goal was met last September, reducing the number of bulbs required by past and present lighting products. He also highlighted an initiative at IKEA’s Aalborg store in Denmark, where consumers can earn store credit by bringing back old IKEA furnishings. The items are then resold within the store for the price they were purchased from the consumer.

But surely selling longer-lasting products and trading pre-owned items without a mark-up is bad for business?

“Not so,” Engberg says. “People sometimes come to IKEA with a bit of a guilty conscience. They want to buy stuff, but they are unable to completely forget the consequences. Our customers want this, they want us to transform the way we do business. When we started buying back our furniture at Aalborg we actually saw an increase in revenue.”

Steering a company the size of IKEA on a new path isn’t easy, however.

“Commitment has to come from the very top,” Engberg cautions. "It was our outgoing CEO who appointed a Chief Sustainability Officer in 2011, meaning for the first time sustainability was represented in our management team.”

Engberg explained how the company's top management recognised the growing role of sustainability in determining how brands such as IKEA are perceived by new generations of consumers. They also recognised the capacity for sustainability to drive business innovation and the threat that it could pose, even to the world’s largest furniture retailer.

“We see emerging circular-economy business models as a great opportunity to develop the business further,” Engberg said. “If we didn’t, we’d have to start looking at them as a risk. Sooner or later, other companies will start creating business models that disrupt the accepted way of selling home furnishings.”

“It’s the same with the sharing economy. Consumers are being asked, ‘Why buy a sofa if you’re only going to be in this location for a few years?’ Yes, disruptive businesses like this might be small right now, but so was Netflix when Blockbuster famously dismissed them. Uber has shown the world how successful these new business concepts can be — they were unknown a few years ago, now they’re the largest taxi company in the world.”

So what does the future hold for IKEA?

“Growing our circular economy initiatives is the next big thing for us,” Engberg reflected. “We want to utilise the resources already under our control: our waste streams, our preowned furniture, things like that.

“In fact we’re already trying stuff out in various countries and we expect to launch our new business models globally within 18 months. The current moment in time is a fantastic and inspiring point on our sustainability journey for both IKEA and our customers.”