For much of the world, one of the first brands that come to mind when discussing home improvement is IKEA. The Swedish company now maintains an incredible 422 of its one-stop-shop home and furniture stores across 50 countries. The 957 million store visits and 2.5 billion web site visits in 2018 have generated an impressive 38.8 billion euros in retail sales. Despite this lofty position in the Home market, IKEA is nowhere near the first name that comes to mind when discussing Smart Homes - but that is promising to change with the announcement of significant investment and restructuring of the firm’s smart home division.
Officially, IKEA entered the smart home market in 2012 but little happened until 2015 and when it did, it wasn’t much. The Swedish firm chose to begin its smart home journey with a range of wireless phone chargers, some built into other appliances and furniture. Rumors of true smart home product development rumbled on through 2016 and 2017 until the release of Trådfri. IKEA’s smart lighting system put the firm in competition with leading lighting firms getting into tech and various tech-firms getting into lighting. This was the first big smart home test for IKEA, which was, for the most part, a failure.
“The best part of Ikea’s new smart light system is its dimmer. The dimmer doesn’t work very well, and its battery ran out in under a month, but it’s cute and yellow, and my cat absolutely loves it,” Jacob Kastrenakes wrote, in a 2017 article titled IKEA’s Smart Lights are as Stylish and Breakable as its Furniture, for tech-news portal The Verge. “Ikea’s smart light system, called Trådfri, works perfectly if you set it up once and never touch it again,” his review continued.
Another reputable tech-review platform, Tom’s Guide, gave IKEA’s Tradfri smart lighting starter kit 1.5 stars out of 5, calling it the “Not-So-Smart Lighting Kit”. Complaints centered on compatibility, an over-simplified interface, WiFi range limits, and a setup that was described as “convoluted.” The review’s author, Mike Prospero saying, “as you might expect from Ikea, the instruction manual for setting up its smart lights comprises several pages of wordless diagrams, some more inscrutable than others.”
While IKEA has had remarkable success with its flat-pack furniture strategy built on cheap materials, stylish design, and self-assembly - that strategy does not necessarily transfer to smart home products. The firm has been making furniture since the early fifties, it knows what it is doing, where costs can be saved, and what the market demands. IKEA is new to connected technology, however, they will need to learn a whole new set of skills in order to compete with technology firms that have decades of experience driving the evolution of connected technology to the IoT and smart homes we see today.
Until recently, IKEA has seemingly tried to spread a bit of smart into every department, hoping that the various product development teams will come up with their own smart ideas. The upcoming release of smart blinds is a perfect example of IKEA’s potential to fill a furniture-centric smart home niche but doesn’t imply future success in core product categories. While their smart speaker partnership with Sonos may show a lack of confidence in smart product development. In order to compete on the smart home’s biggest stages, the Swedish furniture company will need to start acting more like a technology company, and that is what last week’s announcement is all about.
According to the announcement, the company is developing the dedicated business unit - IKEA Home Smart - now responsible for the smart home business “end to end.” The new business unit will be headed up by Björn Block, who joined IKEA in 2012 to start the smart ball rolling. IKEA Home Smart will now sit, as an equal, alongside the firms ten other business units that include Livingroom & Workspace, Textiles, Kitchen and Dining, and Ikea Food. Backed by significant investment, the new unit is expected to deepen the firm’s understanding of this new technological landscape then, presumably, utilize IKEA's global reputation to plot world domination.
“At IKEA we want to continue to offer products for a better life at home for the many people going forward. In order to do so we need to explore products and solutions beyond conventional home furnishing,” said Björn Block, Head of the new IKEA Home Smart Business Unit. “We have decided to invest significantly in Home smart across Ikea to fast-forward the development. This is the biggest New Business we are establishing since the introduction of Children’s IKEA,” added Peter van der Poel, Range & Supply Manager at IKEA.
The jury is still out, however. Attacking an article published on The Verge that called the IKEA announcement “a wake-up call to smart home incumbents like Google and Amazon,” tech-consultant and Futurist Michael Spencer said: “A wake up call? says the Verge. Give me a break! It’s hard enough for these Scandinavian companies to compete in their chosen vertical. Keeping up with tech companies is beyond ridiculous here.”
Spencer does make a point. The smart home is a tech-market within homes, just like the BIoT is for commercial buildings, but that works both ways. As technology creates new markets in the built environment it also presents an opportunity for non-tech firms with deep pockets and a strong global presence to compete in that new market. Consider how Phillips (now Signify), GE, and OSRAM, are breaking into the smart buildings and cities markets from “old-school” lighting. IKEA, coming from furniture, is also coming into competition with the world’s biggest tech firms.
“In the IoT age, the IT industry hoped to capitalize on physical things by bringing them into the cyber world. In doing so, however, they opened the cyber door to physical product manufacturers,” we wrote in an article on lighting. “The new cyber-physical world, as the name suggests, has brought these two previously distinct elements into alignment. What may once have been thought of as a new physical frontier for IT companies is proving to be the perfect cyber opportunity for “old world” sectors.”
76-year-old IKEA may have been slow to take advantage of their position in the smart home market but despite the headstart, the big tech players such as Google, Amazon, and Apple have hardly raced ahead. None hold sufficient market share to dominate the space anytime soon, product offerings are fragmented, and the market itself is still coming to terms with smart home technology. There is still space in this market, especially for a home-retail giant with unrivalled distribution.
“Most players, including IKEA, don’t seem to have reached critical mass in smart home products, because it is such a diffuse and complicated market,” says Frank Gillette, principal analyst at Forrester Research. “But their specific product approach and gigantic distribution network give them a big platform.”
The smart home market is still ripe. Smart device penetration in American homes was only 15% in 2018, while the global average is 7.7%, with the UK being the second most IoT-friendly nation with an 8% penetration rate. If the dream of a smart world is to become a reality, then homes represent a market full of opportunity. And if the place where most people go to get stuff for their homes can develop a strong range of smart home products, then maybe this announcement is a wake-up call for the rest of the sector.
“By working together with all other departments within IKEA, the business unit of IKEA Home Smart will drive the digital transformation of the IKEA range, improving and transforming existing businesses and developing new businesses to bring more diverse smart products to many people,” Block stated during the announcement. “We are just getting started.”