Ikea store

Why IKEA Is a Retail Competitor to Fear

The recent passing of Ikea founder Ingvar Kamprad has revived attention to a retailer that is too frequently overlooked in home furnishings circles. All too often it is the butt of jokes. From the unintelligible instructions required to assemble its furniture and the unpronounceable names for the 9,500 products it sells to its meatballs, Ikea is more often laughed at than taken seriously by people in the home business.

“The home furnishings industry across the board doesn’t have Ikea on their radar,” says Warren Shoulberg, former editorial director for several Progressive Business Media home furnishings business publications. “When home furnishings retailers talk about their competition, I never hear anybody talk about Ikea. That is going to be a huge mistake.”

Ikea ranks

In reality, Ikea is a powerhouse of innovative home furnishing ideas and experiential retailing that places it second to none in furnishing American’s homes, from the kitchen cabinets, including all the stuff in the drawers and cabinets, to the bedroom, bathroom, living room and dining room.

While Ikea generates just about half the sales of top-ranked U.S. home retailer Bed, Bath & Beyond – some $6.1 billion, to $12.2 billion – it does so out of fewer than 50 stores, as compared with over 1,500 for Bed Bath & Beyond, and with a much broader product range. With that, Ikea is the second-largest home retailer in the country today.

While Ikea may be given short shrift among those in the home furnishings industry, it ranks among many others. It’s No. 41 overall on the Forbes list of the world’s most valuable brands. And among retailers on that list, it is behind only Walmart (No. 24), Home Depot (No. 34) and H&M (No. 36).

Consumers also know Ikea and value it. The Reputation Institute places Ikea No. 58 among the world’s most reputable brands in its 2017 Global RepTrak 100 listing. And the more familiar people are with Ikea, the stronger its reputation. Further, among the consumers who count the most and will propel Ikea into the future – millennials – Ikea’s reputation is strongest.

Ikea is ramping up in the U.S.

Ikea is on the move, and soon home furnishings retailers won’t have the luxury of ignoring it any longer. Despite its furniture-in-a-box model, it lagged in ecommerce strategies but that is changing.

Initially choosing to drive customers to its stores via its website, Ikea has made online ecommerce a priority. Now customers can buy online and pick up orders in 31 of its 47 U.S. stores. It has also implemented lower shipping costs for customers in the Northeast, to follow with the same across the country.

After opening four new stores in 2017, Ikea plans to add three more this year and the same in 2019 and is building two additional customer fulfillment centers in the States. Regarding its plans, Lars Petersson, president of Ikea U.S., told USA Today, “In the U.S., we are committed to expanding our shopping experience with new retail locations, enhanced technology and greater accessibility for customers.”

“Ikea is being much more aggressive,” says Shoulberg. “People are remembering back in the day when they didn’t have American-sized bedding or when their styles weren’t matched to American tastes. But you go into Ikea now, and their design aesthetic is much more attuned to North America, everything is in the right sizes, and they are doing a big kitchen business. I continue to be impressed by what they are doing.”

Shoulberg identified seven pillars of Ikea’s prominence in the home furnishings market in an article for The Robin Report, “Is Ikea the most influential retailer of the past 25 years?” Here’s an overview.

Merchandising: Solutions for every home need today, forget about tomorrow

The traditional furniture retail model is based on the idea of investing in pieces that will last a lifetime. But that is totally foreign to many Americans, who the Census Department estimates will move some 11 times in their lifetime. Ikea’s buy it now, use it now and forget about tomorrow is perfectly in sync with millennials’ mindset.

“Ikea was like Xanax for home furnishings, instantly relieving the stress and anxiety of making a big-ticket purchase,” Shoulberg writes in his article. “It’s a seminal change in the home business and one that conventional furniture stores are still trying to come to grips with, for the most part unsuccessfully.”

Products: Clean, basic and scaled right

Back in 1985 when Ikea first landed on America’s shores, its modern Scandinavian style and smaller scale were largely foreign to American tastes. But since then Americans have grown into favoring its clean, basic, simplistic lines. “This is exactly the design aesthetic that every store in America is going after today and Ikea has been there for decades,” Shoulberg writes. “They have Gen Y written all over them.”

Pricing: Ultimate affordability

Ikea has created a pricing perception of being inexpensive without being cheap. “They are insanely inexpensive when compared to similar products at stores like West Elm, CB2 or even Bed Bath & Beyond,” he notes, adding that people don’t feel like they are buying “cheap crap” when shopping at Ikea.

Stores: True shopping destinations

Going to an Ikea store is a true shopping experience, from the Swedish meatballs to the maze-like path customers are led through where they experience all that the store offers, like it or not.

Ikea stores are designed to get people to spend hours inside, which makes them true destinations. “Its locations remain places where people go on purpose with the intent of buying,” Shoulberg explains. “There are great display vignettes, lots of selling floor excitement and all kinds of multiple assorting so that even if you miss it the first time, you’ll see it three or four more times before you’re done.”

Marketing: Catalogs are still dream books

Since the beginning, Ikea’s annual catalog has been the hallmark of its marketing efforts. Not a catalog marketer per se, Ikea’s catalog is a dream book to imagine what an Ikea-furnished life would be like. More than a directory of products, Shoulberg wrote it is “page after page of romance, giving shoppers decorating ideas, design direction and lifestyle imaging.”

But Ikea is also stepping up its marketing through more television spots and print with advertising that is relevant to the cultural issues of our time, for example featuring gay and bi-racial couples.

In a new ad, Ikea asks “Where did the American dream go?” with messages that “Today, it’s not about having more, but being more,” and “Today, it’s not about ‘bigger is better,’ but about having smaller, more meaningful experiences.”

Sourcing: Private labels, exclusive designs

Every one of the 9,500 products it sells and the 2,500 new products introduced each year, Ikea designs and sources directly. While it doesn’t own all its manufacturing, it buys no products off the shelf.

Being so vertically integrated, Ikea can deliver on its promise of being “planet positive “ and transition to a “circular economy,” as it states in its 2017 yearly group summary. So it invests in recycled and environmentally-sound and responsibly-sourced materials and is committed to being a responsible company across all sectors it works in and all constituencies it serves, including its employees.

Name: Unforgettable

And Shoulberg concludes his assessment of Ikea’s pillars for growth with its distinctive and unforgettable name. Its name is a mashup of founder Ingvar Kamprad initials, the farm where he grew up, Elmtaryd, and his hometown of Agunnaryd. And not only is the company’s name memorable but so are its product names, said to originate with Kamprad being dyslexic so he needed names he could remember to classify products, even if we can’t pronounce them.

In the United States today there are just over 100 major metropolitan statistical areas with over half-a-million people. By year’s end, Ikea will have half of them covered. It’s time for Ikea to become recognized by the home furnishings community as the powerhouse competitor it is. Forewarned is forearmed.

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