Ikea Case Study

IKEA Invades America, Written Case Assignment[pic 1]

EYLUL TASKIN

What factors account for the success of IKEA?

IKEA has below average retail prices with a simple and functional design with relatively fair quality, I believe their success relies under few details. One of them is pricing. Their efficiencies in cost of material such as purchasing with large volumes, working with designers that uses low cost manufacturing process such as using quality material visible areas but less quality material unseen parts, using their customers as a distribution channel, manufacturing different parts of the furniture with different suppliers to achieve lower costs.

Second one is their store design which direct customer one store to another and make it hard to turn back. That makes customer to see all the wide range of product that IKEA sell. As a human, we are irrational when it comes to buying a new product or service. Sometimes we buy products we don’t even need. I want to explain my idea with an example. Let’s assume I want to buy a new wardrobe. To reach wardrobe section I need to pass through at least 3 sections such as kitchen appliances, bedroom furniture section, office section. Moreover, to reach to check out, I need to pass through another 5 sections. Even though I have nothing in my mind and I come there for just for a wardrobe shopping I saw along the way ideas for a better and more efficient room or wardrobe designs such as boxes, frames in context, even a couch that I just realize it’s existence and makes sense to buy it. But still, I don’t know if it’s going to fit in my room. IKEA supplies small other equipment’s for free such as measures and pens and papers. It helps IKEA to capture their customer right at the moment while they are vulnerable. Because if the customer decides to take time and go back home, probably will notice that that new couch is not that necessary. Combination of this vulnerability with a low price is triggers their customer purchasing decision.

Third success factor is their design of experience. Restaurant, bistro, large parking lot and children playroom turning furniture shopping to a combination of experience and fun activity which makes customer stay in the store and keep up buying extra products. Restaurant has a big halo effect there. First there is no entrance directly opens up to their restaurant. They keep their healthy-looking food with reasonable price sometimes even with almost no profit, gives customers the nice feeling of eating at a restaurant with their families with very low price which make customers come for the food and stay to buy furniture. Second factor with the restaurant is everything they serve is available on the market. The market is giving the sense of shopping abroad with foreign names and Nordic design packaging. Lastly, designing the check out with tasty snacks and fast foods with very low price, ending their long, tiring shopping experience companionship with ice cream or a pizza slice creates positive bonds with the brand at the end.