IKEA is steadily making its way to India with its latest store set up at Nagasandra, Bengaluru.
So, we will look at their business model today to understand what makes them successful and unique.
The Beginning
IKEA was started way back in 1943 by 17-year-old Ingvar Kamprad in Sweden. He began by selling wallets, jewellery, and pens.
Ingvar Kamprad aimed to provide well-designed and quality products at the most economical prices so more people could afford them.
IKEA soon began selling furniture in 1948; this is what they are known for today.
Their Model
The IKEA model has the following:
Flat-pack furniture
Circular store layout
Sustainability
Price tag first
Flat-Pack Furniture
By no means were IKEA the first to introduce flat-packing, but they made it famous.
Flat-pack furniture is DIY assembly furniture fittings where the furniture gets shipped as separate pieces with assembly instructions to the customer.
So, how did flat-packing help IKEA?
IKEA began to save tons of money on transportation, lowering the overall price of the furniture.
Fully-assembled furniture is always bulkier and hence, more expensive to ship. With flat-packing, IKEA has effectively reduced its overhead costs and product prices.
Flat-packing also ensured that IKEA stocks more furniture in their storerooms and warehouses.
Another advantage of flat-packing is that customers take over the assembly of the furniture. It gets customers involved in the process and as a consequence, they value the furniture even more since it involved their own effort.
“…labour alone can be sufficient to induce greater liking for the fruits of one’s labour.”
Note: IKEA also offers assembly services to consumers who request it.
Circular Store Layout
IKEA’s physical stores are structured circularly with exit points and a one-way access system.
And because of the circular store layout, customers will not know what comes next. It makes them traverse the circular store to its end because curiosity and the “fear of missing out” compel them.
But it does not end there.
IKEA stores also have restaurants and other eatery options to maximise the time that customers spend at the store.
Sustainability
IKEA is conscious of its environmental impact and aims to incorporate sustainability at every step of the product lifecycle. To this end, they focus on
Procuring raw materials sustainably and from responsible suppliers with whom they maintain long-term relationships
Using hybrid/alternative sources of raw materials like engineered wood, blended cotton, and more
Maximising the use of renewable energy with wind and solar power, thereby reducing emissions
Reducing waste and utilising resources to their fullest
Price Tag First
Apart from these, IKEA also starts its furniture design by first attaching a price tag.
So, furniture designers must adhere to the goal of sticking to the budget through extensive planning, from production to delivery.
This method reduces waste, optimizes and saves on operational cost, and ensures a proper plan for every design.
Minimalist Design
IKEA embraces the minimalist approach in their manufacturing and follows a clean and modular design that improves functionality, maximises flat-packing, and looks sleek.
This type of design also ensures that they maintain their sustainability standards by using hybrid materials and incorporating a furniture lifecycle that remains conscious of the waste it generates at each step.
The Impact of IKEA
IKEA and its unique business model have maximised its profit-earning capacity through furniture selling, food sales at stores, the delivery and assembly of furniture, and other similar services.
The IKEA effect is continually growing and has positively impacted how we buy furniture.
Written by Tag