IKEA group competitive analysis

The IKEA Group is a global and leading retail multinational corporation established in 1943 by Ingvar Kamprad that designs and sells furniture (Kim 2016). The business has expanded enormously to become a multinational brand specializing in Scandinavian-style furniture (Lenhardt 2014). The IKEA group offers flat-pack furniture that is simple to install for the consumer, eliminating packaging and expense (Kim 2016). Furthermore, the IKEA brand sells over 9,500 brands worldwide, including home furniture and kitchen appliances. Furthermore, the company has an online marketplace website where consumers can order a wide range of products. IKEA group has 18 stores across the United Kingdom which includes café services, restaurants offering Swedish cuisine (Kim 2016). The company has about 30 franchised unite and 301 stores worldwide with the largest countries in terms of sales revenue being the United Kingdom, Sweden, France, Germany and the States of America (Kim 2016). This paper provides a competitive analysis, competitive advantage along with IKEA e-commerce strategy.

Competitor Analysis

A competitor analysis provides an understanding of the different aspects that provide an edge against competitors (Tuten 2010). The analysis gives a comprehensive outlook on past, present and the future strategies and their effect in driving sales revenue. It is critically important to identify and understand IKEA group competitors such as Wall-Mart, Home Centre and Amazon that will help the company to understand what they should do to maintain an edge in the industry.

One of the leading competitors against IKEA group is Home Centre Stores (Lenhardt 2014). IKEA group has outperformed Home Centre Stores in terms of past revenue and sales (Kasturi 2014). However, Home Centre Stores has embraced an aggressive marketing campaign to increase their sales revenues. One of the core strengths of Home Centre Stores is strategic advertising and promotions (Lenhardt 2014). IKEA group has also been aggressive and innovative in their marketing campaigns such as Lighting activity, Pop-up shops and Dining activity (Kasturi 2014). This allows the company to introduce and display new products and services strategically for the consumer to not only purchase but also as a way to create awareness of the different products and services they deal in. Contrary to this, Home Centre Stores has been offering gift vouchers to consumers as a means to drive sales which have had a positive impact on the company’s revenue growth. Even though, IKEA group has a large marketing group that develops effective marketing strategies which help the company to stay ahead in terms of revenue and sales growth (Lenhardt 2014). For example, the promotion by Home Centre Stores prompted IKEA group to offer 200,000 free coupons across Dubai with the winner being granted an opportunity to shop products from IKEA stores worth 2000Dhs (Lenhardt 2014). Other competitors of IKEA group include Amazon and Wall-Mart stores.

Amazon is an online shopping market retailer dealing in a wide range of products such as electronics, furniture’s, accessories among others while Wall-mart is a leading retail departmental store dealing in a wide range of products such as groceries (Vafopulos and Kontokostas 2011). Both Wall-Mart and Amazon Inc. are indirect competitors of IKEA group due to their wide range of products. Therefore, Amazon and Wall-Mart have a competitive advantage in product differentiation compared to IKEA group that is specialized in terms of the products they offer. Wall-Mart Stores has many stores across the world compared to IKEA group. Therefore, both Amazon and Wall-Mart stores have a competitive advantage in terms of revenue and sales and a large number of products they offer (Vafopulos and Kontokostas 2011).

Company

Stores

Employees

Products

Sales Revenue

IKEA

301

183,000

12000

$37.6 billion

AMAZON

Online Marketplace

541,900

480 million

$135.99 billion

WALL-MART

11,000

2.3 million

Over 400 million

$478.61 billion

HOME CENTRE

85

5000

10,000

$65 million

Competitive Advantage

According to Tuten, there are two forms of competitive advantage which include cost advantage and differentiation advantage. A company with an advantage in cost has the capability to deliver a similar product or service at a low price compared to competitors (Tuten 2010). The company experiences economies of scale, low labor cost, production efficiencies and easy access to materials (Tuten 2010). Differentiation advantage provides a company with the ability to offer the market with services and products that are different from competitors product mix (Tuten 2010). On one side, Amazon and Wal-Mart have a differentiated advantage against IKEA group since they offered different products and services. On the other side, IKEA group has a cost advantage against Amazon and Wal-Mart since it provides furniture and household accessories at a lower cost.

Cost

Advantage

(Vertical axis)

IKEA Company

Home Centre

Competitive Advantage

Competitive Disadvantage

Wall-Mart and Amazon Inc.

Differentiation Advantage (Horizontal axis)

IKEA E-commerce strategy

In today’s retail world, IKEA group has become one of the largest companies to change its e-commerce strategy as a way to adjust and align itself with the changes in the market dynamics. A large number of shoppers have shifted to online shopping which prompted the company to launch its furniture accessories known as a flat pack through e-commerce websites (Lal and Greenberg 2014). The strategic move to online for IKEA group was slow and gradual as a result of internal resistance that interfered with its business strategy of using complex layouts on its stores to increase impulse buying and attraction of customers to physical stores for construction of their desired furniture. The company has developed strategies to adopt the e-commerce strategy and shift from brick and mortar. IKEA group has embarked on several retail technological innovations and experiments to increase customer experience and thereby increase sales revenue. This comes as a result of the stiff competition from retailers such as Amazon. The company’s e-commerce strategy incorporates augmented reality, pop-up shops, and mini stores.

Augmented Reality

The augmented reality application will provide customers with the ability to visualize the different look on the accessories offered by the company to their homes before the actual purchase (Kastuti and Lenhardt 2014). The application provides a three dimension display of the products before customers commit to making any purchases. The company has been encouraging customers to explore the virtual reality application across different products to create a home they want such as IKEA kitchen accessories. The application allows for about 500 -600 different products while more items will be added over time. According to the chief executive officer of IKEA Company, the company aims to make customers feel confident particularly when making big investments such as kitchen accessories. Currently, the company has offered the virtual reality shopping across four locations.

IKEA Mini Stores

IKEA group has incorporated the use of mini-stores across different locations contrary to its previous big box stores located in suburbs (Kastuti and Lenhardt 2014). The company has opened more than 44 mini stores across locations such as Canada, China, Italy, United Kingdom and Japan. Through this, customers will have the ability to place their orders for various items online and collect the items from the mini-stores which will be easily accessible thus improving efficiency in delivery. Most of the IKEA group stores are far and not easily accessible by most people. Therefore, the company aims to develop mini stores as a way of reaching more people and reducing delivery inefficiencies.

IKEA Pop-up Shops

IKEA group has also introduced pop up shops to promote kitchen and bedroom ranges (Kastuti and Lenhardt 2014). For instance, the company introduced pop up eatery in London which promoted IKEA items and accessories that enabled consumers to cook food for their families and friends. Additionally, the company introduced another pop-up shop that featured bedroom accessories and furniture’s which encouraged customers to enjoy an experience of breakfast in bed.

Omni Channel Experience

The company has also introduced an Omnichannel experience for customers to use options such as click and collect (Kastuti and Lenhardt 2014). Consumers will have the ability to place orders through a simple click and collect their items across different collection points. Online shoppers will have the ability and flexibility to use different options which have the potential to generate incremental spending, particularly for furniture purchases. IKEA Omnichannel strategy aims to enable convenient online purchase without forcing consumers to carry or browse products offered through the stores. This will increase the average size of the basket at the checkout.

References

Kasturi, M. Toffel, D. Lenhardt, J. (2014). Sustainability at IKEA Group. Havard Business Review.

Kim, S., & Kim, J. (2016). Overseas Strategy of Global Furniture Retailer: The Case of ‘IKEA Korea’. INTERNATIONAL BUSINESS REVIEW, 20(1), 199.

Lal, R., Alvarez, J., & Greenberg, D. (2014). Retail revolution: Will your brick-and-mortar store survive?

Tuten, T. L. (2010). Enterprise 2.0: How technology, e-commerce, and web 2.0 are transforming business virtually. Santa Barbara, CA: Praeger.

Vafopoulos, M., Theodoridis, T., & Kontokostas, D. (2011). Interviewing the Amazon Web Salespersons: Trends, Complementarities, and Competition. 2011 15th Panhellenic Conference on Informatics.