BackFew businesses on the planet have been more successful than IKEA. Established in 1943, the world’s 8th largest retailer employs 211,000 people in one of 445 stores in 52 countries. In 2022, IKEA reported a gross profit of 14 billion euros, up from 13 billion euros in the previous year. IKEA has revolutionised retailing, persuading shoppers to travel […]
Few businesses on the planet have been more successful than IKEA. Established in 1943, the world’s 8th largest retailer employs 211,000 people in one of 445 stores in 52 countries. In 2022, IKEA reported a gross profit of 14 billion euros, up from 13 billion euros in the previous year.
IKEA has revolutionised retailing, persuading shoppers to travel to its out-of-town stores, navigate the maze-like layout of the stores, transport the furniture home, and assemble it themselves – all features that traditional retailers would never embrace. These features of the IKEA experience have delivered great success – even leading to the documentation of the ‘IKEA effect’ – a cognitive bias in which consumers place a disproportionately high value on products they partially created.
Given its success over 80 years, it would be understandable for IKEA to resist any change to its unique formula. Many businesses would have considered the IKEA idiosyncrasies sacred cows. Sure, they were initially counter-intuitive, but they worked and consistently delivered results. But another feature of IKEA is its preparedness to change and adapt to changing customer needs.
Recognising the primacy of the customer, IKEA recently collaborated with customers in a co-creation process to review its offering and how it is delivered to customers. Several sacred cows were on the block. This collaboration gave rise to some profound changes at IKEA, including – investing heavily in its online offering; developing smaller stores – often located in central business districts; offering home delivery services; and paying contractors to assemble products.
According to IKEA CEO Jesper Brodin, growth in the business had stalled, and new growth opportunities were needed. All aspects of the business, even the sacred cows closely associated with the brand, had to be reviewed. Brodin said – ‘There was basically a realisation that we were not the leader of the decision. Something had changed in society.’ IKEA began working with its customers to develop a new model and a more customer-responsive approach. And the changes seem to have worked, with gross profit increasing by 9%, online sales up from about 6% to 25% and a smaller store in central Stockholm increasing annual footfall in the capital from 6 million to 9 million.
Mistakes were made. Initially, IKEA abandoned its unique store layout for a more free-flowing design, but customers complained, suggesting – ‘I want to know I’m not missing anything.’ In response, the labyrinth was reinstated but with short-cuts signposted. Logistics in the city centre were also an issue. The move to smaller stores had to be replaced with a strategy involving a mix of larger and smaller stores. IKEA worked through these issues using trial and error.
Despite its success, IKEA was prepared to challenge its sacred cows, working with customers to update the customer experience – opening up new opportunities. IKEA understands the importance of both the customer experience and co-creation. IKEA continues to LISTEN!
D. John Carlson – Marketing Consultant Perth.
Maximising performance through ethical customer centric marketing, branding, and communication.
Advisor – Director – Mentor.
Consumer insights – strategic planning – marketing consultancy – branding consultancy – communication consultancy – culture consultancy – strategic marketing advisor.