Ikea and Hennes & Mauritz have ploughed hundreds of millions of euros into venture capital investments as they look to place bets on technologies and products that can help them resist the massive disruption taking place in retail.
The world’s largest furniture retailer and second-largest seller of clothes both started taking minority stakes in smaller companies in recent years, making venture capital investments into start-ups from fintech and recycling to sustainability and food.
Ingka Group, the leading Ikea retailer, has led the way, investing €200m in 21 companies in the past three years including robotic furniture maker Ori Living, mattress recycling company RetourMatras, and Indian interior design start-up Livspace.
H&M has spent more than SKr500m ($52m) on stakes in 16 businesses developing more sustainable ways of making clothes, such as dye company Colorifix, as well as Europe’s largest private fintech, Klarna.
Both Ikea and H&M are in the middle of one of the biggest turnrounds in their histories as they react to shoppers increasingly buying goods online as well as large ecommerce competitors such as Amazon and Alibaba — twin forces that have led to widespread disruption and bankruptcies among retailers.
Jesper Brodin, chief executive of Ingka, told the Financial Times that Ikea’s legendary founder Ingvar Kamprad had saved a significant sum of money “for a rainy day”. The retailer has invested much of that in bonds “in case we run into trouble” but has recently made a number of venture capital investments as well as acquisitions.
“Ingvar was always talking about the long-term needs, and saving money for when you need it. Partly, we need it now as our business is transforming. We have made venture investments in interesting companies, particularly in sustainability and digital,” he added.
Karl-Johan Persson, H&M’s chief executive, told the FT in a separate interview that his venture capital investments had already been “a good financial journey but for us the most important thing is they are [businesses] we believe that can really help the company”.
He added that H&M had invested a lot in “sustainable material innovations” such as Renewcell, a Swedish start-up that produces clothes from recycled textiles.
Mr Persson added: “It will not change us now, but in the future I think it will do a great amount of good for the world, and hopefully also for the company. I believe many of the conventional materials today will be replaced by these sustainable materials with quality and prices that are as good or better.”
H&M has also invested in companies developing new business models such as Thread, a menswear fashion start-up that uses artificial intelligence and personal stylists to offer tailored recommendations to shoppers, and Sellpy, an ecommerce platform for second-hand clothes.
Ingka has gone beyond mere venture investments by making its first acquisitions, snapping up odd-jobs service TaskRabbit and kitchen installer Traemand in the past three years. The flat-pack furniture retailer added that it expected to make four to five venture capital investments a year as well as the occasional outright acquisition.
“In many aspects, we are also learning from the collaborations to help us . . . as we transform our business to be even more accessible, convenient, and sustainable,” it added.