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IKEA: Flat-Pack Frenzy or Digital Dynasty
Imagine you're IKEA, king of affordable, flat-pack furniture, with massive stores that feel like a weekend getaway (hell on earth if you ask me). But urban living is shrinking spaces, and online shopping is exploding.
Suddenly, a global pandemic turbocharges e-commerce, forcing you to rethink how to reach your customers without losing your hands-on experience.
As the world shifts toward convenience, IKEA faces fierce rivalry from online players and local e-commerce disruptors. Big-box stores might be great for immersion, but they're costly and hard to get to in crowded cities.
With e-commerce booming and urban populations growing, IKEA must decide: Lean into e-commerce for quick reach, or, like Woolies Metro stores, scatter out bite-sized outlets to keep the experience personal?
The Strategy Standoff
Strategy A: Partner Up for Digital Dominance
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IKEA could team up with e-commerce giants like Amazon to sell directly on their platforms, tapping into their massive user base and logistics.
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This could boost sales fast, by reaching customers who find it hard to get to their stores. But it would their dilute brand control and turn them into just another Amazon seller.
Strategy B: Micro-Stores for Urban Conquest​
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IKEA could roll out small-format display stores in key markets, focusing on urban areas and compact footprints. With no Swedish Meatballs.
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This would let customers visualise offers using digital tools for planning, with click-and-collect from the warehouse stores or even home delivery.
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Drawbacks of this approach would include higher setup costs and losing IKEA's signature "maze" experience.
So, Which Did They Choose?
Cast your vote to find out!
Better luck next time, Strategy B was chosen!
Good Job, Strategy B was chosen!
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But what did this mean for IKEA...
Outcome: Facilitator Commentary
Matt Braithwaite-Young
Managing Partner
t +61 2 9002 3100
After dipping its toe in the water of e-commerce partnerships, IKEA ultimately went for Strategy B, building micro-stores and mini planning studios.
Opening the Doors to Small-Scale Success
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In 2017, IKEA had a good look at Strategy A with a pilot partnership with Amazon, selling small goods to explore online reach.
But it had wrapped up by 2019, because IKEA prioritised building its own digital ecosystem (which remains an appalling experience) over third-party partnerships.
I imagine they would have been alarmed at how Amazon treats all its “partners” – which is by identifying high performing categories and them undercutting their own suppliers.
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Micro Stores for Flat Pack Fun
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In the end, IKEA charged ahead with micro store formats. In the US they called them Plan & Order Points. They first popped up in Dallas and Las Vegas.
Back home in Australia, they call them Home Planning Studios. The first was inside Sydney’s Warringah Mall with just 98m² of floor space. More stores followed, including a much larger 350m² format in Westfield Highpoint in central Melbourne.
The Big Risk​
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Personally, I think this is a big mistake. Introducing these formats is a huge strategic shift for IKEA. After decades of building massive stores on city outskirts, and leaving logistics to the customer, these stores now offer delivery which creates a new cost base.
It also unwinds their distinctive value proposition. They once emphasised Swedish inspiration and innovative design - and owned the psychology of the day out in the maze.
The whole point of their value chain was that customers took care of assembly and logistics! This new model, with city locations and delivery options, fundamentally changes the complimentary aspects of their value chain and frankly brings them closer to competitor offers.
That said, IKEA says it's working and the small stores are attracting new customers (and definitely not cannibalising the flagship stores).
But they would say that, wouldn’t they? Time will tell.
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How to Assemble Your Own Strategy
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If your business is navigating digital disruption or shifting consumer habits, developing a new strategy on your own can leave you feeling the way I do when I stare down a flat pack with an allen key in my hand.
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A Turning Leaf workshop will help your leadership spot the issues and trends, debate possible paths, make choices, and (most importantly of all) commit to massive action as a team.
Our facilitators guide you through the process, so you get clarity and buy-in with your leadership team aligned and ready to inspire your whole organisation. Unfortunately, you won't get Swedish meatballs here but I will buy you a coffee!
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To learn more, call Matt on +61 2 9002 3100.
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