In 2005, IKEA opened a large store in the UAE. From that date on, UAE residents and citizens used to visit the store and enjoy IKEA’s shopping experience.
I still remember when I came to the UAE in 2007 and everyone was recommending IKEA for buying relatively cheap, simple and easily assembled furniture.
Indeed, IKEA offers a case study that highlights the need to re-think customer experience concepts. It is no more about the product, but rather the experience; it is no more about the ideal customer experience but rather the emotional experience and the added value, it is no more about perfection in every and each touchpoint but rather the customer needs and preferences that define a successful business model.
The playing area where customers can leave their kids and enjoy the shopping, the dining area where the food is offered with a Swedish flavor, the easy-to-install products that can fit anywhere are your house, all seemed to be attractive services for customers. Nevertheless, this great experience was not reflected in IKEA’s gross profit worldwide.
IKEA analyzed the market and found out there were three reason behind the weak profit:
1. Competition with Added Value:
Online shopping invaded every home, making it easier for companies to offer products online and ship them from China or India with relatively lower prices.
2. Customer Attitude:
Customers prefer shopping behind screens rather driving to IKEA and walk across the stores.
3. Changing Customer Needs:
Customers request re-assembly services in case of moving from one house to another. Moreover, the need for spare parts was also driving customers to think differently and find more reliable products, since IKEA does not offer spare parts.
Accordingly, IKEA made a complete shift in strategy. By 2019, it started to focus on implementing the below initiatives:
1) Data Usage:
In 2018, IKEA appointed Barbara Martin Coppola, the new Chief Digital Officer of IKEA. She was hired to manage fast-paced technology, make best use of data and accordingly drive change inside the organization based on customer needs. She was keen to foster a culture of innovation, enhance time management, utilize body language, introduce marketing strategy, market IKEA products in China and find a good partner!
2) Mobile application:
To enable the online shopping experience, IKEA launched its mobile application that allows customers to choose, select and even imagine how IKEA products will look like inside their homes using virtual reality techniques.
This state-of-the-art technology allows users to visualize how their homes could be furnished with IKEA products by entering room dimensions and choosing their preferable products from a range of different tastes and life styles. They can then order those products by usnig IKEA’s mobile app. IKEA first launched an augmented reality app in 2017, which allowed customers to see how more than 2,000 items would fit into their homes, but they could not shop from it.
3) Outsourcing Services
IKEA was moving forward towards catering to customer needs, including products’ maintenance, painting, and providing spare parts. IKEA US bought TaskRabbit – service that sends people out to do the most basic things customers request, like wiping the sink, painting walls, assembling and re-assembling products, and the like.
With this, IKEA started shaping a radically new horizon for itself. Instead of just selling (relatively) cheap, (sort of) simple (to put together) furniture, it saw strong potential in the services business, such as furniture repair.
4) IKEA Heads to City Centers
IKEA’s traditional strategy used to include opening large outlets outside the city. With the current challenges, IKEA shifted their strategy towards opening smaller shops inside the city, where customers can have quick services, while the main services would still be offered at the large outlets. Quick services include fixing and assembling products and providing spare parts. IKEA also launched several trials for renting out furniture; as research suggested it was particularly attractive to students as well as some short-term expatriate workers.
It is very interesting to notice how big players on the market tend to change their strategies to adapt to the new market constraint or to fulfill their customer needs.