In this interview, Remco offers advice on how social entrepreneurs can learn from IKEA’s tactics for assessing market potential, building a strong foundation in a market, and expanding strategically.
Remco Hempenius has worked at IKEA for over twenty years, beginning his career as a B2B manager, eventually becoming a store manager, and then progressing to roles as a facilitator training others within IKEA. Remco first joined the IKEA Delft store in the Netherlands in 1999.
Three years later he became Project Manager for the Test & Development Department at Inter IKEA Systems, developing the IKEA Concept. In 2007 Remco moved to Helsingborg, Sweden supporting IKEA retailers around the world with the establishment of new IKEA stores and developing new markets. In 2011 he started in Switzerland as Retail Establishment Manager with the assignment of building up a new organisation. He became the Store Manager of the IKEA Hengelo store in 2014. In 2017 he joined Global Retail Services of the Ingka Group. Responsible for global business development, portfolio management, investments and strategy.
Since the summer of 2019, Remco has worked Core Business Franchise as Market Development Leader working closely together with IKEA franchisees to develop existing and new markets. Today, Remco is a Global Business Leader who works alongside IKEA’s franchisees to help them expand in their current markets.
Can you introduce yourself and your role at IKEA?
REMCO: I have a 21-year background working with IKEA developing the IKEA concept and being a store manager. I’m now the expansion development leader responsible for expanding in existing and new markets. I've been doing this for half a year. Over the course of my career at IKEA I’ve had the opportunity to live in different countries to operate IKEA stores. In the process, I learned to develop myself in different fields and areas.
What are your day-to-day responsibilities as an expansion development leader?
REMCO: IKEA operates a franchise model where we franchise our concept to retailers who operate the stores in their local markets. My day-to-day work involves developing existing and new markets in close collaboration with our franchisees.
We're a small team of experienced development leaders that come alongside our franchisees to support them as they develop in their markets. My job involves a variety of things. It’s of course making sure that the IKEA concept is implemented. It also has to do with IKEA Range and Supply (IKEA Range and Supply is a core business within Inter IKEA Group responsible for developing and supplying the global IKEA range. They work with the whole value chain from supplier to customer). These days, it also involves the whole transformation that IKEA is undergoing.
We're stepping away from building blue box stores on the outskirts of cities or rural areas and instead actually moving the IKEA offer close to where people live, work, and socialise, which is mainly in the bigger cities. That also means that the IKEA concept is evolving quite rapidly. We’re supporting the franchisees in this transformation and opening new opportunities for them in their markets.
What would you say are the most exciting parts of your job?
REMCO: I’m globally responsible for a business development program called MPD, or Market Potential Development program. In this program, we bring together different franchisees and
key stakeholders from the IKEA value chain. I work to help them gain a deeper understanding of their markets, identify potential opportunities, understand their customers, and develop a new strategy for their market. The most exciting thing for me is this notion of coming alongside groups of people to help them see the potential to jointly develop this new IKEA.
Can you describe how IKEA assesses the potential for expansion within an existing market?
REMCO: We do everything in very close collaboration with our franchisees. Today we're taking what we call a “people potential approach.” Globally we want to reach and interact with 3 billion people. So, when we look at an existing market, we first ask: Where are you today with your people potential? Who are you reaching today? How many more people could you actually reach tomorrow? Then we normally take a 10-year window and say: Where could we be in 10 years? What do we need to do in the coming 1-3 years to actually reach that? And so forth.
It starts very much with identifying the people potential. The other side is, of course, making sure that we have an offer that is affordable and accessible and creates a positive impact. We're expanding the potential by making sure that our products are affordable in a local market.
What metrics are particularly important to look at when trying to determine whether you have reached full market potential?
REMCO: Again, we start with the people potential. Who are those people that we feel we could reach and interact with and what do we need to do to unleash that potential? Of course, that is not so linear anymore. It’s physical, it’s digital, it’s a lot of different things.
We look at metrics like market share. We focus on volume because we're here to reach more of the many people.
It’s also about selling more because by selling more we're able to decrease prices. That has always been the magic formula for IKEA: by selling more you are able to produce more, which then gives us the opportunity to lower our prices.
Having said that, this sounds a little bit naive in this new environment. We also need to consider environmental sustainability. We know that there might be different ways for people to engage with our products. It’s not only selling; it could also be about leasing and renting. We’re experimenting with new business models around how we can create a better everyday life through the home furnishing solutions that we offer.
Remco Hempenius has worked at IKEA for over twenty years, beginning his career as a B2B manager, eventually becoming a store manager, and then progressing to roles as a facilitator training others within IKEA. Remco first joined the IKEA Delft store in the Netherlands in 1999.
Three years later he became Project Manager for the Test & Development Department at Inter IKEA Systems, developing the IKEA Concept. In 2007 Remco moved to Helsingborg, Sweden supporting IKEA retailers around the world with the establishment of new IKEA stores and developing new markets. In 2011 he started in Switzerland as Retail Establishment Manager with the assignment of building up a new organisation. He became the Store Manager of the IKEA Hengelo store in 2014. In 2017 he joined Global Retail Services of the Ingka Group. Responsible for global business development, portfolio management, investments and strategy.
Since the summer of 2019, Remco has worked Core Business Franchise as Market Development Leader working closely together with IKEA franchisees to develop existing and new markets. Today, Remco is a Global Business Leader who works alongside IKEA’s franchisees to help them expand in their current markets.
Can you introduce yourself and your role at IKEA?
REMCO: I have a 21-year background working with IKEA developing the IKEA concept and being a store manager. I’m now the expansion development leader responsible for expanding in existing and new markets. I've been doing this for half a year. Over the course of my career at IKEA I’ve had the opportunity to live in different countries to operate IKEA stores. In the process, I learned to develop myself in different fields and areas.
What are your day-to-day responsibilities as an expansion development leader?
REMCO: IKEA operates a franchise model where we franchise our concept to retailers who operate the stores in their local markets. My day-to-day work involves developing existing and new markets in close collaboration with our franchisees.
We're a small team of experienced development leaders that come alongside our franchisees to support them as they develop in their markets. My job involves a variety of things. It’s of course making sure that the IKEA concept is implemented. It also has to do with IKEA Range and Supply (IKEA Range and Supply is a core business within Inter IKEA Group responsible for developing and supplying the global IKEA range. They work with the whole value chain from supplier to customer). These days, it also involves the whole transformation that IKEA is undergoing.
We're stepping away from building blue box stores on the outskirts of cities or rural areas and instead actually moving the IKEA offer close to where people live, work, and socialise, which is mainly in the bigger cities. That also means that the IKEA concept is evolving quite rapidly. We’re supporting the franchisees in this transformation and opening new opportunities for them in their markets.
What would you say are the most exciting parts of your job?
REMCO: I’m globally responsible for a business development program called MPD, or Market Potential Development program. In this program, we bring together different franchisees and
key stakeholders from the IKEA value chain. I work to help them gain a deeper understanding of their markets, identify potential opportunities, understand their customers, and develop a new strategy for their market. The most exciting thing for me is this notion of coming alongside groups of people to help them see the potential to jointly develop this new IKEA.
Can you describe how IKEA assesses the potential for expansion within an existing market?
REMCO: We do everything in very close collaboration with our franchisees. Today we're taking what we call a “people potential approach.” Globally we want to reach and interact with 3 billion people. So, when we look at an existing market, we first ask: Where are you today with your people potential? Who are you reaching today? How many more people could you actually reach tomorrow? Then we normally take a 10-year window and say: Where could we be in 10 years? What do we need to do in the coming 1-3 years to actually reach that? And so forth.
It starts very much with identifying the people potential. The other side is, of course, making sure that we have an offer that is affordable and accessible and creates a positive impact. We're expanding the potential by making sure that our products are affordable in a local market.
What metrics are particularly important to look at when trying to determine whether you have reached full market potential?
REMCO: Again, we start with the people potential. Who are those people that we feel we could reach and interact with and what do we need to do to unleash that potential? Of course, that is not so linear anymore. It’s physical, it’s digital, it’s a lot of different things.
We look at metrics like market share. We focus on volume because we're here to reach more of the many people.
It’s also about selling more because by selling more we're able to decrease prices. That has always been the magic formula for IKEA: by selling more you are able to produce more, which then gives us the opportunity to lower our prices.
Having said that, this sounds a little bit naive in this new environment. We also need to consider environmental sustainability. We know that there might be different ways for people to engage with our products. It’s not only selling; it could also be about leasing and renting. We’re experimenting with new business models around how we can create a better everyday life through the home furnishing solutions that we offer.
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Furniture as a service
In Switzerland, the Netherlands, Poland and Sweden, new models of product ownership, which offer furniture as a service, are being tested by IKEA retailers. The test is a furniture subscription service that gives access to furniture solutions without ownership and enables more affordable options. These tests will give insights about the circular capabilities needed in the business to efficiently maintain products and prepare them for longer or multiple lives.
The core idea is that customers lease the furniture, which is maintained and repaired as needed during the leasing period. Upon return, the furniture is cleaned, refurbished and made ready for its next home. When the furniture has been reused as many times as possible, the materials and components are recycled. Unsurprisingly, the results so far have been positive, with indications of environmental benefits from extending the life of materials and resources.
Tactically, how do you start to understand what that gap might be between a market’s current penetration and its potential?
REMCO: First, you need to understand your market and the world you operate in. We do basic situational analysis of where we're today. Where are we socially, technologically, economically, environmentally, politically? What is happening in our markets? What are movements? What are trends that we see happening in five to ten years?
It’s very hard to predict five to ten years ahead, be. We do market research, we try to understand our competitors, and we look to understand our customers—how they live, how they shop, their pains, their needs. Who are they? Where do they live?
We also take a more macro-perspective. Especially when we’re moving into the big cities around the world, it's very interesting to know that in most cities, there is no one downtown. People don’t leave their boroughs. They don’t leave their neighbourhoods. So, we need to understand where people are and what their needs are. How do they commute? How do they move around the city? All these things are brought together into our analysis.
We also take a more macro-perspective. Especially when we’re moving into the big cities around the world, it's very interesting to know that in most cities, there is no one downtown. People don’t leave their boroughs. They don’t leave their neighbourhoods. So, we need to understand where people are and what their needs are. How do they commute? How do they move around the city? All these things are brought together into our analysis.
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What needs to be in place before making the decision to open a new store or expand in an existing market?
REMCO: First and foremost, we should not expand before we have a strong base. It's super important to consider the low hanging fruit that you have in your current and existing assets. Take care of your existing assets. That can take many forms. It doesn’t necessarily mean that you are utilising 100% of the assets. It might even be that you take a different approach with your current assets.
For example, maybe less people are shopping physically in the retail stores. So, we don’t need all the space, but you should make sure that the experience and the existing environment is living up to the standards in the market.
I would always start with a strong base before you expand because it doesn’t make any sense to expand without taking care of your current and existing units. If you expand without having a strong foundation, you will grow, but that is very short term. In the long term, you will not generate sustainable profits and sustainable growth unless you take good care of what you have today.
Very good advice. Anything else you think we should know about how IKEA approaches expansion?
REMCO: We're driven by the vision of creating a better everyday life for the many people. We need to expand so that we can reach more of the many people. It's very important for us to become more accessible and affordable and have a positive impact. We believe that expansion is an integrated part of our business.
Expansion is also very connected to our financial structure because we're a privately owned company. We own our land. We own our buildings. We don’t spend what we don’t have. This is very counter to the current culture where— especially in the digital environment— people raise huge amounts of funding when they don’t even have a product. We only expand with the money we have ourselves. We don’t go out there to shareholders. We don’t go out there to banks. All the expansion we do, we fund ourselves which is quite unique to IKEA.
What should social entrepreneurs consider when making decisions about whether to expand in an existing market? What factors should they make sure are in place?
REMCO: You need to have a good understanding of your market and the world you operate in. Is there a clear need for the product or service that you offer? You need to understand your competitors and you need to understand the trends that are going on in your market. How is your market moving? Again, it’s not so much about what is happening today, but what’s happening in the coming three to five years. How can you contribute to that?
Of course, you also need to have a good sense of the logistics and infrastructure and supply that will be required for expansion so you can understand the barriers you’re up against. And again, you need to make sure you have a strong foundation. You need to understand what it'll mean for your organisation if you are going to double or triple in size. What will that mean for your leadership and the people that are running your business today? They might not be the people that will help you to expand because starting a company is one thing but scaling might require different skillsets and different capabilities. Those are also things that you should always consider.
That makes a lot of sense. In many cases, we see entrepreneurs that have started in an urban center and now are trying to reach more rural areas. It sounds almost the opposite of what IKEA is doing now. Do you have any thoughts on that?
REMCO: Yes. Of course, I can understand from a social entrepreneur’s perspective, they might want to go into rural areas, but the thing is you need to be where the people are. Markets are concentrated where people are, and we know that most people will be living in big cities. So, unless your product is in the agriculture sector, you should be thinking about concentrating on urban environments. As you start to build your brand, you need to start with representation in a few key cities and become known before you continue to the next city.
That’s a really good point. When does it make sense for a business to just focus on growing within a single city or country versus when should they start to think about new markets and new countries? What factors should go into that decision?
REMCO: You need to ask questions like: Do I have the capabilities? Am I strong enough? Have I tested my products enough? Do I understand the customers enough in my existing markets? Then look around and determine where it makes sense for you to expand. That doesn’t necessarily mean we all have to go to San Francisco. I was working recently with a group of South African entrepreneurs and they all had their binoculars on San Francisco because they had the idea that the angel investors were based there. But that might not be the right approach for everyone. You also need to build a business based around customer needs. And to understand those, you need to be close to local markets.
That’s great. Any final advice for these entrepreneurs?
REMCO: Yes—stay close to who you are and what your initial idea is. But then also understand that you might not be the right person to expand a company. And especially if you’re a founder who invented or developed something, you might not be the right person to take it to the next level. You need to stay close to who you are as a company and why you exist, but then also look for collaboration. Look for other people that might help you to scale.
This interview was done as of IKEA as part of the IKEA Social Entrepreneurship and Acumen East Africa Accelerator in 2020.
All use, reproduction and distribution of this work is subject to a CC-BY-NC-ND license.
REMCO: First and foremost, we should not expand before we have a strong base. It's super important to consider the low hanging fruit that you have in your current and existing assets. Take care of your existing assets. That can take many forms. It doesn’t necessarily mean that you are utilising 100% of the assets. It might even be that you take a different approach with your current assets.
For example, maybe less people are shopping physically in the retail stores. So, we don’t need all the space, but you should make sure that the experience and the existing environment is living up to the standards in the market.
I would always start with a strong base before you expand because it doesn’t make any sense to expand without taking care of your current and existing units. If you expand without having a strong foundation, you will grow, but that is very short term. In the long term, you will not generate sustainable profits and sustainable growth unless you take good care of what you have today.
Very good advice. Anything else you think we should know about how IKEA approaches expansion?
REMCO: We're driven by the vision of creating a better everyday life for the many people. We need to expand so that we can reach more of the many people. It's very important for us to become more accessible and affordable and have a positive impact. We believe that expansion is an integrated part of our business.
Expansion is also very connected to our financial structure because we're a privately owned company. We own our land. We own our buildings. We don’t spend what we don’t have. This is very counter to the current culture where— especially in the digital environment— people raise huge amounts of funding when they don’t even have a product. We only expand with the money we have ourselves. We don’t go out there to shareholders. We don’t go out there to banks. All the expansion we do, we fund ourselves which is quite unique to IKEA.
What should social entrepreneurs consider when making decisions about whether to expand in an existing market? What factors should they make sure are in place?
REMCO: You need to have a good understanding of your market and the world you operate in. Is there a clear need for the product or service that you offer? You need to understand your competitors and you need to understand the trends that are going on in your market. How is your market moving? Again, it’s not so much about what is happening today, but what’s happening in the coming three to five years. How can you contribute to that?
Of course, you also need to have a good sense of the logistics and infrastructure and supply that will be required for expansion so you can understand the barriers you’re up against. And again, you need to make sure you have a strong foundation. You need to understand what it'll mean for your organisation if you are going to double or triple in size. What will that mean for your leadership and the people that are running your business today? They might not be the people that will help you to expand because starting a company is one thing but scaling might require different skillsets and different capabilities. Those are also things that you should always consider.
That makes a lot of sense. In many cases, we see entrepreneurs that have started in an urban center and now are trying to reach more rural areas. It sounds almost the opposite of what IKEA is doing now. Do you have any thoughts on that?
REMCO: Yes. Of course, I can understand from a social entrepreneur’s perspective, they might want to go into rural areas, but the thing is you need to be where the people are. Markets are concentrated where people are, and we know that most people will be living in big cities. So, unless your product is in the agriculture sector, you should be thinking about concentrating on urban environments. As you start to build your brand, you need to start with representation in a few key cities and become known before you continue to the next city.
That’s a really good point. When does it make sense for a business to just focus on growing within a single city or country versus when should they start to think about new markets and new countries? What factors should go into that decision?
REMCO: You need to ask questions like: Do I have the capabilities? Am I strong enough? Have I tested my products enough? Do I understand the customers enough in my existing markets? Then look around and determine where it makes sense for you to expand. That doesn’t necessarily mean we all have to go to San Francisco. I was working recently with a group of South African entrepreneurs and they all had their binoculars on San Francisco because they had the idea that the angel investors were based there. But that might not be the right approach for everyone. You also need to build a business based around customer needs. And to understand those, you need to be close to local markets.
That’s great. Any final advice for these entrepreneurs?
REMCO: Yes—stay close to who you are and what your initial idea is. But then also understand that you might not be the right person to expand a company. And especially if you’re a founder who invented or developed something, you might not be the right person to take it to the next level. You need to stay close to who you are as a company and why you exist, but then also look for collaboration. Look for other people that might help you to scale.
This interview was done as of IKEA as part of the IKEA Social Entrepreneurship and Acumen East Africa Accelerator in 2020.
All use, reproduction and distribution of this work is subject to a CC-BY-NC-ND license.