IKEA
Thin wallets. We should take care of their interests." IKEA adheres to this philosophy by reducing prices across its products by 2 percent to 3 percent annually. Its focus on value also benefits the bottom line: IKEA enjoys 10 percent margins, higher than its competitors such as Target (7.7) percent) and Pier 1 Imports (5 percent) IKEA sources its products from multiple companies all over the world rather than a handful of suppliers as many furniture retailers do. This ensures the lowest price possible, and savings that are passed on to the consumer. Today, IKEA works with approximately 1,300 suppliers from 53 countries.
IKEA's stores are located a good distance from most city centers, which helps keep land costs down and taxes low. The average IKEA customer drives 50 miles roundtrip to visit an IKEA store. Many stores resemble a large box with few windows and doors and are painted bright yellow and blue -Sweden's national colors. They save energy with low- wattage light bulbs and have unusually long hours of operation; some are 24-hour stores. When a consumer walks through an IKEA store, it is a very different experience than most furniture retailers. The floor plan is designed in a one-way format, so the consumer experiences the entire store first, then can grab a shopping cart, visit the warehouse, and pick up the desired items in a flat box.
Many IKEA products are sold uniformly throughout the world, but the company also caters to local tastes.
⚫ In China, it stocked 250,000 plastic placemats with "Year of the Rooster" themes, which quickly sold out after the holiday.
. When employees realized U.S. shoppers were buying vases as drinking glasses because they considered IKEA's regular glasses too small, the company developed larger glasses for the U.S. market.
IKEA managers visited European and U.S. consumers in their homes and learned that Europeans generally hang their clothes, whereas U.S. shoppers prefer to store them folded. Therefore, wardrobes for the U.S. market were designed with deeper drawers.
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Visits to Hispanic households in California led IKEA to add seating and dining space in its California stores, brighten the color palettes, and hang more picture frames on the walls.
IKEA has evolved into the largest furniture retailer in the world with approximately 300 stores in 38 countries and revenues topping €21.5 billion in 2009. Its top countries in terms of sales include Germany, 16 percent; United States, 11 percent; France, 10 percent; United Kingdom, 7 percent; and Italy, 7 percent.
Questions: (7.5 pts of each)
1. What are some of the things IKEA is doing right to reach consumers in different markets? What else could it be doing?
2. IKEA has essentially changed the way people shop for furniture. Discuss the pros and cons of this strategy.