What Factors Account for the Success of Ikea

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1. What factors account for the success of IKEA?

Founded in 1943, Ikea rose to become the world’s largest furniture retailer in 2002 with sales of almost $12 billion. There are several success factors that helped Ikea to succeed in the furniture market.

Firstly, Ikea implemented a cost effective approach regarding its corporate strategy. By eliminating waste and reducing costs (e.g. shipping), Ikea was able to set much lower pricing points than competitors who offered the same quality.

Furthermore, Ikea invented a unique product strategy. Taking into account consumer trends, they set product priorities for which they then set a price by using a simple matrix that is much lower than the competition. Moreover, they encouraged suppliers and designers to compete for the contracts to reduce costs and get a broader range of designs to choose from. Also, they packaged the furniture unassembled in flat boxes to reduce shipping costs. Despite being cost-effective, Ikea also wants to keep a balance between quality and efficiency, which they captured in the slogan “Low price with meaning”. Their customers valued the combination of “form, function and affordability” that no other competitor offered.

Another factor for Ikea’s success was their reverse positioning approach in the furniture market. While other players focused on making augmented features of the products (e.g. home delivery, assembly) expected, Ikea removed some of these features by opening self-service stores and leaving assembly to the customer and added other features that the competition did not offer: good, distinguishable design at affordable prices and a unique shopping experience. This in combination with the changing value proposition in the furniture market helped Ikea to succeed.

Additionally, Ikea created a unique shopping experience. They engaged customers to take own actions (measurements, assembly, transportation), while the offered them a clear path through the store by passing through different showrooms where the customers could get an image on how the furniture would fit into their homes. Also, Ikea installed other services like restaurants or children care centers.

2. What are some of the downsides of shopping at IKEA?

While Ikea’s unique shopping experience is valued by many customers, it also comes with some downsides.

In Ikea stores, customers have to take some actions that are part of the expected product at stores of competitors. They have to do preparations (measurements, etc.), take care of transportation and assembly the furniture themselves. Especially the assembly with minimum of instructions can lead to frustration with Ikea.

Furthermore, Ikea only offers a limited range of styles, so that some customers might not find something that fits the rest of their homes.

Moreover, the Ikea products often do not last longer than a few years before they break.