The Simple Reason Why People Stop Going to IKEA

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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 Gross Profit
Gross profit of IKEA worldwide 2009-2018
Source: www.statista.com)

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.

The Shift of STrategy
The Edge

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.

2 COMMENTS

  1. Hi Ahmed,

    Thank you for posting. Since you have decided to be quite controversial, I’d like to respond, if I may. I do agree with you that any business, IKEA included, must stay in touch with the deep-rooted, completely irrational and emotional needs and decisions of it’s customers. That is a given, although this most basic rule is broken by corporations that should know better every day.

    Your graphic showing IKEA’s profitability can be interpreted in the way you did it, but for me it is a reflection of the world’s economy, and I would suggest that most major manufacturers – whether automobiles, telephones, FMCG, and countless other industries – are even worse off. Could it be that IKEA has responded to the financial pressures that consumers worldwide are under by becoming more price competitive?

    However, the UAE is definitely not representative of the world. I have travelled there at least twelve times in the past decade, and I have spent in excess of 50 days sometimes as a tourist, and sometimes as a businessman, and, to be blunt, there are few places in the world where such excess, such greed, such mercenary behavior (by both Emiratis and expats,) are so obvious. There is such a sense of snobbery, and such a desperate need to show off that “I have the most expensive car, watch, house, dinner, etc.” that it is quite draining.

    And that is why I believe that people have “stopped going to IKEA.” I mean, after all, who in Dubai or Abu Dhabi would boast that they managed to get a great deal on furniture that they have to install at home? Oh, and by the way, I also had some nice cheap meatballs while I was there. Nobody!

    It’s not IKEA, nor its locations, nor its Apps – it’s the people of the UAE. Therefore, the most important point you make in your post is that customer attitudes determine success. And perhaps IKEA’s mistake was to think that they could succeed in this country of excess.

  2. Thank Aki for your valuable feedback. indeed I agree with your first part, IKEA responding to the world economy by innovating new ideas and adapt to customer and market needs.
    meanwhile, important to say that throughout my article i was not focusing on UAE as a case. moreover, the new shift in IKEA strategy are not implemented nor initiated in UAE, it is all initiated in US and western market. also to add in UAE they preparing for opening another big and far branch as we get o use from IKEA.
    I also agree that market/people culture has another great input, UAE citizens has different preference but do’t forget that UAE citizens are around 15% from the UAE population where 85% are expats coming from 202 nationalities with different behaviors and preference.
    last to say, personally I was looking for baby high chair for my new baby boy, and i knew very well that IKEA is offering the best and cheapest one, and i was asked by my wife to go together and buy it however I was actively looking for any other alternative with even higher price so that i can save my day and not to waste a day in IKEA.

    Thanks once more for stopping on my article.

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