IKEA’s competitive advantage (9 different factors)
Over the past 70 years, IKEA has rapidly grown into a multinational conglomerate that designs and sells assembleable home furniture and accessories worldwide.
As IKEA demonstrates leadership over competitors like Walmart, Ashley Furniture Industries, and Wayfair, let’s take a look at the various competitive advantages that boost IKEA.
Read on to find out IKEA’s 9 most effective sources of competitive advantage!
IKEA’s competitive advantage (9 different factors)
1. IKEA sells low-priced products
IKEA prides itself on being able to provide high quality, reliable merchandise at affordable prices.
Stores are usually located in cities that target 16- to 34-year-olds, such as students, young families and new homeowners, who know their budgets. As a result, IKEA makes $1.1 to $12 billion in annual profits.
It’s no surprise that selling affordable products has become IKEA’s leading competitive advantage. However, they are not the only companies benefiting from this strategy.
Big retailers like Walmart profit from the sale of lower-priced items; nevertheless, they continue to market themselves as discounters rather than affordable high-end brands.
IKEA’s pricing strategy certainly sets it apart from its competitors. Many high demand products such as sofas, beds, dining tables, chairs and cabinets are available for as low as $500!
For some perspective on IKEA’s price differentiation, let’s look at the cost of kitchen countertops, cabinets and installation.
While retailers like Lowe’s and Home Depot charge $7,000 to $12,000 for installation and merchandise, IKEA’s service costs just $5,000 and guarantees a long life.
Plus, IKEA has a Family Cardholders Campaign to earn up to 15% IKEA Points on kitchen purchases worth $1,000-$2,000!
2. Wide variety of home decorations
IKEA offers a wide range of products, and the 300,000-square-foot store is filled with furniture, appliances and accessories.
At IKEA you can buy 9,500 items per store and 2,500 new products are launched every year. It’s no wonder customers use Maps! IKEA’s production strategy is based on the following dimensions to create a democratic design:
- form
- Features
- low price
- sustainability
- quality
Each item is crafted with a contemporary design that combines function with style, meaning customers can finally say goodbye to bulky, mismatched storage units.
Many of the products are produced in a minimalist look, allowing clients to cultivate their own space and even customize their pieces.
In addition, a large percentage of products in the IKEA catalog are made with sustainable products to have a positive impact on the world around us.
Many IKEA favorites, including the BILLY bookcase, POÄNG armchair and MALM bed, are made with wooden elements from managed IKEA forests.
Alternatively, wooden products like the ODGER chair are made from a composite of polypropylene and reusable wood fibers.
Bamboo is used in many IKEA products because it is strong, sustainable and grows 10 times faster than wood. Equally versatile bamboo items range from plates to storage cabinets to vibrant kitchen panels!
Producing a wide range of sustainable products caters to an increasingly eco-conscious consumer base, differentiating them from their competitors.
3. International influence
Founded in Sweden in 1943, IKEA has become a household name known around the world.
In just 70 years, IKEA stores have opened in the United States, Australia, the United Kingdom, Morocco, Denmark, Japan, Russia, the Dominican Republic, South Korea, Canada and other countries.
In total, IKEA has more than 22 pick-up and order points in 11 countries and 28 distribution centers in 16 countries.
In more than 50 countries, 420 stores have opened their doors to eager customers, with approximately 1 billion visitors a year.
70% of the stores are located in Europe, with Germany accounting for a whopping 15% of total sales and the US alone accounting for 14%.
In recent years, IKEA has opened 19 new stores, including the first store in India in Hyderabad. A huge milestone for the brand!
By 2025, IKEA aims to expand its reach and increase its international presence by reaching 3 billion customers per year. Expansion plans include opening stores in the Philippines, New Zealand, Brazil, Vietnam and more!
2.5 billion customers visit IKEA.com every year, which means you don’t have to live near a store to reap the benefits. In fact, IKEA offers international shipping to countries that don’t have IKEA at all!
4. Business cost efficiency
IKEA strategically sells low-priced products to maintain good customer satisfaction, thereby generating a healthy profit for customer savings.
Effectively minimizing the overall cost of doing business helps IKEA build a competitive advantage. Let’s look at a few ways companies manage costs:
flat pack
The famous flat-pack “ready-to-go” products are very compact and easy to transport. Flat packs save IKEA $133,000 a year in shipping costs and a further $175,000 by avoiding material waste.
Reserved price
Have you ever wondered how IKEA products stay so cheap? Designers plan products based on pre-determined prices, which ultimately influence their choice of materials. Products are made with sustainability and cost in mind.
minimal in-store staff
At IKEA, customers both in and out of the store have access to a plethora of convenient digital tools, which means a minimal staff team is required.
Find in-store self-checkout and pickup locations next to digital screens for family members. Reduce customer inquiries by displaying furniture and labeling it with helpful descriptions.
5. Efficient supply chain
IKEA’s huge success is mainly due to its efficient supplier network all over the world. Identified as the backbone of the company, there are 1,046 suppliers in 50 countries.
A reliable supply chain with low risk of product substitution strengthens trust between brands and consumers.
The company aims to establish long-term and stable relationships with suppliers by signing long-term contracts. However, IKEA is financially stable enough to switch from one supplier to another, which means they often call the shots on pricing and volume.
Fortunately for suppliers, IKEA sources its versatile materials in bulk. As a dominant market leader, there is little risk of losing a supplier’s business to a competitor.
Launched in 2000, the IWAY Code of Conduct aims to maintain healthy relationships between brands and their suppliers and sub-suppliers.
Approximately 1,000 audits are completed each year to ensure that there are no irregularities. IKEA’s rules prohibit child labor, discrimination, minimum wages, and uphold health and safety standards.
6. Strong marketing campaign
IKEA prides itself on having a strong marketing strategy, which is another important factor of competitive advantage.
IKEA is consumer-friendly, and its marketing campaigns are designed to connect with customers on a personal level without forcing a sale on the product.
Localization is critical to any global company, accommodating different cultures, currencies and seasonal holidays. In addition, IKEA hosts many events targeting certain types of people, such as teachers and university students.
IKEA combines digital marketing with in-store branding, often using witty imagery or catchphrases to their advantage; it’s what makes them so memorable.
Major social media sites such as Twitter, Instagram and Facebook are used to engage with wider audiences. You can also find IKEA on Pinterest, which showcases idyllic rooms with hashtag products to help customers achieve the look.
IKEA’s YouTube has videos on various topics such as
- Assembly Instructions
- Revealed Tips and Tricks
- Cultural Value
- real story
- Even video collaborations with famous faces like Zara Larsson.
Video content effectively builds a positive relationship with consumers.
7. High-profile collaborations
A high-profile collaboration is sure to create a buzz among consumers, and IKEA has a lot going for it!
As leading brands, alternative companies in adjacent markets are often keen to enter into partnerships as they are a great way to enhance anyone’s competitive advantage.
To date, IKEA has partnered with big names like Adidas and Little Sun; you can even buy IKEA’s version of The Sims!
In 2020, IKEA teamed up with the billion-dollar Lego company to launch the BYGGLEK series. The collection features fun storage solutions and exclusive LEGO brick sets. Like most of IKEA’s storage units, these boxes are sleek and understated.
If you haven’t already, you can find the unique IKEA app developed in partnership with Apple on the App Store and Google Play.
Enter a virtual reality version of IKEA from the comfort of your own home, where you can shop, check stock availability and enjoy special deals with your Family Card.
Before you buy, use your camera to digitally place products in your own room to see how they fit with the rest of your space.
8. Positive brand reputation
Maintaining a positive, strong brand reputation is at the top of the IKEA agenda, and customer satisfaction is at the heart of the business.
Rapid growth and high revenue figures clearly indicate brand awareness, which means this is a valuable source of competitive advantage.
Statistics predict that furniture sales will grow by 25.5% by 2025 due to the increase in remote working. Therefore, it is very important for IKEA to win customers.
One of the keys to IKEA’s success is its effort to perfect every element of its business to the highest standard.
Whether it’s maintaining a quality supply chain, conducting effective marketing, or achieving ultimate customer satisfaction. Committed to the happiness of consumers, it has won a richer reputation in the market.
From the very beginning, IKEA has established itself as a unique brand of high quality at low prices. Countless customers rave about the impressive life expectancy of IKEA products, with many homeowners saying their kitchen cabinets last 6-7 years!
9. Differentiation
Adopting a differentiation strategy is conducive to the success of IKEA. Companies actively seek a competitive advantage by designing products that are distinct and desirable from their competitors.
Implementing low-price strategies is nothing new. However, IKEA’s approach to designing affordable, modular, ready-to-assemble furniture sets the brand apart from its competitors.
In addition, IKEA has managed to maintain a large number of loyal long-term suppliers, giving them a clear production advantage.
Unlike rival home goods and accessories retailers, IKEA…
