Ikea Pricing Strategy

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IKEA has cut the prices of nearly 300 products since September 2012. The price of a hot product, Skubb boxes, was cut to 29.9 yuan from 49 yuan. The president of Ikea China ( retail business ) Jillian said : " The advantage we have is that we can control all the links in the supply chain, and reduce the cost of each link effectively so that it runs in the entire process from product design to ( shape, material and so on ), select the OEM manufacturer management, logistics design and mall management. ” IKEA claims that " what we design first is the price tag ", i.e. set price first, then design products by designers.

Designs are derived from price
In order to keep low price, the designers of IKEA Bong Cup must fully consider the factors such as material, color and design. For instance, cups’ color are painted as green, blue, yellow or white, because these color materials cost less than other colors (such as red ); in order to reduce cost in storage, transportation, and production, designers design Bong Cup as a special cone, because this shape of Bong Cup can make themselves go through machine as quick as possible, which leads to a reduction of cost. Furthermore, IKEA also change the height and the handle shape of Bong Cup so that they can stack more efficiently, then, as a consequence, can save space in transport, storage, store displays and the space used by the customers in the cupboard at home. IKEA also invented the " modules " - style furniture design methods (IKEA’s assembling furniture is split, and products are divided into different modules. Different modules can be produced in different regions in terms of cost; at the same time, some modules can also be used in different furniture), which not only reduce the cost of design, and the total cost of the product can also be reduced.

Storage derived from cost
In terms of storage and transportation, IKEA use flat packaging to reduce the rate of damaged furniture in storage and transportation...
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