Who hasn’t heard of the Swedish furniture giant, IKEA? Established in 1943 by 17-year-old carpenter Ingvar Kamprad, who sold furniture via mail catalog, the company has grown to become one of the world’s biggest furniture brands, with more than 424 stores in 52 markets and reaching €38.8 billion in sales in 2018.72 IKEA’s vision is to improve their customers’ everyday lives, and the company follows through by offering a wide range of well designed, functional home furniture at very reasonable prices.

In line with its vision and aims, the company has been very successful in attracting millions of people to its stores with its unique product designs and low prices, making it the world’s largest retail furniture company.73 The store relies on several cost-cutting tactics to deliver lower prices to customers, including ready-to-assemble packages that lower shipping costs for the company.

IKEA achieved a record profit of €4.2 billion in the year 2016.74 However, in 2017, the company’s profits started to dwindle sharply, and in 2018, by the end of August, its profits almost halved.75 The company, however, says that this is expected as it has been aggressively investing in online technologies and business transformation,76 which has increased its costs for the time being; it expects profits to rebound by 2022.77 IKEA has been very slow in adapting to the online revolution.

In fact, until recently, IKEA did not have an online presence in a number of its markets,78 including Australia in 2017.79 The store relied for decades on its old business model,

which is to attract customers to its massive stores displaying unique low-priced furniture. As IKEA continued to face intense competition from competing online stores while at the same time itself missing out on potential growth opportunities from online sales, the world’s biggest furniture store had to embark on a massive technological transformation. Adding to this urgency is IKEA’s recent figures, which showed that its sales only grew by 2 percent in 2017, well below the 7 percent average of the previous five years.80 An enormous change of strategy has been undertaken. The company invested €2.8 billion in its business transformation,

the majority of which was used to fund 14 new distribution centers for its online business.81 IKEA is reportedly implementing a new strategy to have online solutions in all its markets in three years.82 Moreover, IKEA is also investing to improve its online shopping and delivery experience to reduce item delivery time to 24 hours.83 Online shoppers may soon have the option of product-assembling services as well,84 a stark contrast to its old strategy of relying on customer assembly. IKEA recently acquired tech company TaskRabbit, an online platform that allows customers to connect with individuals who will assemble the product for them.

IKEA is also investing in various other revolutionary technologies that will transform the company into a furniture retailer of the future.85 The IKEA Place App offers an augmented reality shopping experience that allows customers to “try” their products in their home before buying. The company is also developing and offering smart products for the future that can be controlled remotely using an app.

Using Tech to Sell Pizza Topic: Revamping for the Future media as a strategic weapon for implementing its new plans successfully?

Discussion Questions 

1. In your opinion, how challenging is the environment that IKEA faces? How does planning help IKEA overcome the challenges?

2. For expanding into the tech domain, which company should IKEA benchmark? Explain.

3. Do you recall seeing an IKEA-sponsored ad, survey, or news item on social media recently? How can IKEA use social media as a strategic weapon for implementing its new plans successfully?

4. Working in a group, discuss the following: Do you think IKEA’s investment in revamping its online shopping initiatives comes a little too late? What opportunities and challenges do you see?