How IKEA is using AI to remove friction from channel experiences

The AI fueled project empowering the retailer to optimize stock levels by pre-empting customer behaviors

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Chanice Henry
03/10/2022

In its mission to make its omnichannel vision a reality, IKEA has developed a tool to empathize with customers and predict their buying behaviors across its online and instore channels.

The 12 months leading up to September 2021 saw IKEA post a five per cent growth in total sales amounting to €41.9bn (US$45.7bn). Online sales increased by 73 per cent, with the retailer’s website welcoming more than five billion visitors. The appetite for the brand’s digital channels did not dampen the popularity of its stores, which hosted over 775 million visitors, with 60 new locations scheduled for launch in the following 12 months.

Increasing channel quality to reduce frustration for shoppers

To safeguard the consistency of shopping experiences across its various in-store and online channels, IKEA developed an advanced AI-based tool which empathises with customer buying behaviors to optimize stock levels.

Inaccurate forecasting can lead to extended waiting periods that can frustrate customers. Peter Grimvall, supply chain development area manager at IKEA,
explains: “Without a proper and accurate forecast, we can’t understand the demand… what needs to be supplied to who and when.”

He adds: “If it’s too much, it increases our costs and hence prices to our customers, or too little, which means we won’t be able to provide the right offering to our customers. This can have a big impact on our business and the way we serve our customers.”

Traditionally global statistical sales data was used to forecast the products needed by the hundreds of IKEA stores across each year. Piloted in Norway, IKEA launched an AI-empowered Demand-Sensing tool that interprets up to 200 data sources to make intelligent recommendations for each product. Conclusions on likely purchasing behaviors on a local level are influenced by various factors including:

Shopping preferences during festivals
In-store visit volumes
When customers receive their salaries
Past buying patterns in holiday seasons
Seasonal changes
Weather forecasts

Demand projections are gathered across online and offline channels to optimize the availability of products digitally and in-store.

This tool builds the real-time empathy of IKEA so it can meet customer needs across touchpoints. Grimvall says: “The new tool can forecast demand from a day-today basis to up to four months. With us trying out new store formats and new selling capabilities, and fastchanging customer behaviors, the tool is agile enough to capture the unique needs.”

Prior to the introduction of this tool, eight per cent of IKEA’s inventory forecasts needed correcting, the Demand-Sensing tool has managed to more than halve this rate to two per cent. The reduction of errors and manual overrides can help IKEA prevent additional supply chain costs from being passed on to customers, which helps keep IKEA products and services as affordable and accessible as possible.