The E-Commerce Model of IKEA

Topics: IKEA, Ready-to-assemble furniture, Furniture retailers Pages: 5 (1659 words) Published: March 26, 2014
Introduction

IKEA, the Swedish home furnishing retailer specialising in affordable flat pack furniture is known as the world’s largest retailer of well-designed, inexpensive and functional furniture and products for the home. IKEA opened its first furniture showroom in Sweden in 1953, and now has over 345 stores in 26 countries worldwide. As the importance of online presence grows, IKEA has also launched over 13 successful e-commerce websites in many parts of Europe, UK and the US. It is undeniable that a core reasoning for their continued success is due to their unique business and e-commerce model and solid core values, which will be discussed further in this report.

IKEA’s E-business Model

IKEA’s Target Audience
IKEA’s vision is to offer ‘a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.’ Because of their cost focus, they have a very broad target audience of anybody with a price preference, appealing to both business-to-consumer and business-to-business categories. IKEA itself has described its target market as ‘‘young people of all ages’’ (Martenson 1987,p.15) including students who may not be able to travel to the more rural locations of the typical IKEA retail store, low to middle income families who may not be able to visit due to household commitments in the day time, and young urban professionals who may not be able to visit the store during standard store opening hours. In the business-to-business context, IKEA’s e-commerce website targets mainly small to medium businesses from restaurants to hotels looking for multiple cheap and chic furnishing products, where it is more convenient to get the products delivered straight to the business, than to self-transport the goods.

Value Proposition
It is clear that IKEA’s value proposition is based around selling quality, stylish, innovative but low cost furnishing products. Their unbeatable low price is their strongest competitive advantage and is achieved through a robust strategy of keeping cost to the minimum by being cost conscious and ensuring cost is the cornerstone of every decision they make. Indeed, IKEA’s enormous scale of operations worldwide has also enabled the furniture giant to achieve huge economies of scale including technical, marketing and purchasing economies, which also plays a crucial role in keeping their costs low. On top of transport economies of scale achieved, IKEA also save costs from the flat pack, self-assembly design of their products, increasing the efficiency of transportation and minimising costs also. There are in total about 12,000 products in the IKEA product range with over 6000 different products available online. IKEA not only sell large furnishing pieces such as sofa and beds but also smaller products for the home, including cutlery, bed linen and candles etc., which provide the customer a convenient one stop shop for purchasing everything needed for the home. Another key part of IKEA’s value proposition is providing a unique shopping experience that brings ideas, inspiration, knowledge, new products and solutions to customers that they can relate to. This is achieved by the room gallery style layout of the store. Unlike the traditional layout of competing furniture retailers, where the same furniture of different styles are shown in one room, and customers would have to used imagination to visualise what it would look like in a room setting, IKEA separate the store into departments of different room functions, and build model rooms with room settings of various themes using different products in the IKEA range, giving customers a visual inspiration for their own homes.

Main Functionality
The IKEA e-commerce website uses an online catalogue to display their products available for sale. The catalogue is categorised into 9 main departments each representing a room or a living space in a home, which is also...
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