Photos by Delphine Ducaruge
Massey executive MBA student Delphine Ducaruge, recently undertook a study tour around Scandinavia to visit and understand the business models of some of the most successful local companies. She tells us what she learnt from one of Sweden’s largest companies: IKEA.
IKEA is an iconic Swedish company that sells modern and contemporary designer furniture and accessories, such as beds, coffee tables, vanities, lamps, frames and now its even started selling plants.
But IKEA is much more than just a retailer. It sells its customers an experience, an experience which remains consistent in all the 325 shops now established around the globe. IKEA’s success is not only demonstrable by the number of successful stores it runs; it is also reflected in their bottom line, with a turnover of 26 billion Euros in 2011.
So, why is IKEA so successful? What is it that they do that others don’t or can’t? It is only a furniture shop after all. Well, not quite.
IKEA’s strategy is well defined and clever, and taps into all the areas of the business.
Firstly, IKEA starts with clever designs which combine cost effective materials and cut costing solutions, without altering the quality and affordable price. The distribution and retail costs are also managed effectively in order to keep prices low.
Ingvar Kamprad, the company’s founder, invented the flat pack/self-assembly concept back in 1953 in order to reduce breakage, shipping and inventory costs. Combined with the self-service solution in 1963, Ingvar created an innovative business model many companies could only dream of. Add to that the addition of free catalogues in 1951 and the restaurants in 1960, you quickly understand that Ingmar didn’t think mainstream. It may be surprising to learn that the IKEA concept, as it is today, was designed back in the 50’s and 60’s, rather than by a marketing guru in the 21st Century!
The real strength of IKEA is the concept which builds a relationship with the consumer. Everything is made to make the customer’s life easier, while allowing IKEA to sell as much as possible.
The experience at IKEA engages customers and empowers them to take control of their shopping adventure. As customers arrive, they grab a little notebook and a pencil to take notes, and pick up a tape-measure in order to measure dimensions of whatever they want. Customers might want to shop in peace, so can check-in their children at the playground where a trained teacher will take care of
them during your visit. Worried about leaving your children with strangers? Fear no more, you are given a free pager in case your child needs you.
As a customer, you then start your visit in the first part of the shop, the showroom. If you have a sore ankle you can borrow one of the wheelchairs. You can’t get lost, as there are big arrows on the floor to indicate the way to go. The shop is designed in a one-way layout IKEA calls the “long natural way”. It encourages customers to visit the entire shop when traditional shops allow you to go straight to what you’re after.
Unlike most furniture retailer, the IKEA showroom displays are based on spaces. These spaces are effectively “imitation homes” with walls. As you sit in the lounge and look around, you are able to visualise how the products would look in your own space. In short, you see everything you would find in a home (with the only exception being the price tags) and you want to buy it all.
The showroom has different spaces, of different sizes and different styles, for different taste and needs. These spaces show you how you could use the furniture and inspire you to dream of a better place. In between the spaces, the furniture is displayed by group styles: couches, coffee tables, beds, kitchens, etc and you can try them.
By the time you get out of the showroom, you’re starving. Well, how convenient. Here is the restaurant! Once you’ve finished eating (in what feels like someone’s dining room), you go downstairs to the market area.
Be prepared to spend a decent amount of time in there. The market area is where everything that is not furniture is displayed and packaged ready to be bought. There are things you didn’t even know existed or that you needed! You grab what you need: frames, lights, textiles, eating and cooking accessories. The choice is huge, the price so low it’s heartbreaking when you live in New Zealand and can only take 23kg home.
After the market area, is the self-serve furniture warehouse, with massive commercial trolleys for your convenience, which is where you grab your flat pack items. You then go and pay wondering how you ended up buying so many items. It’s not your fault. How could you have resisted?
Still hungry? A shop by the exit sells a range of Swedish products from chocolate to salmon.
You don’t have to like this concept. You don’t have to like furniture. You don’t have to like the food. You don’t have to like yellow and blue (logo). But you can’t dislike and deny the creativity, the ingenuity, the thinking outside of the box aspect of IKEA.
IKEA takes care of customers and guests. During a presentation one of my classmates was cold but didn’t say anything, she just looked cold. Out of the blue, a staff member, in charge of making sure things were going smoothly, came and gave her a blanket.
She later explained that during previous uses of the room they had noticed the room tends to be cold and came up with the solution to have a basket full of blankets by the entrance. Who gives blankets to their cold guests? What a brilliant idea! We were all highly impressed at both the attention to detail and the practical solution.
IKEA has a culture of inventiveness and progressive thinking. Since the first day it started, Ingvar and his team have continued to come up with cutting edge ideas. From ingenious designs, the invention of the flat pack, through the showroom layout and market area concepts, through to the restaurant, Ingvar has always thought differently. He doesn’t look around and observe what others do. He looks around and sees what his customers’ needs are. And he satisfies those needs in creative and practical ways.
IKEA has a philosophy of regularly engaging with customers on a personal level. It is not by staying in their comfy corporate seats that management can understand the changes of the customers’ needs, so at IKEA the low profile of the managers is amazing.
It’s part of the IKEA mentality. Everyone at management level (yes everyone) does a week per year on the floor. They talk to customers, help them and guide them. From these conversations they truly understand the changes in the market and can help determine the strategic direction the company needs to take and how to help their customers better. Recently they came up with the 1 Euro breakfast and are now starting to build hotels near their stores. IKEA’s vision is “a better everyday life for the many people”. It communicates this vision all around the world. It is not perfect English however, they may do this on purpose to sound cute and unthreatening. Perhaps, another clever IKEA strategy?