IKEA is a very popular home furnishings brand, that is super iconic with it's yellow logo and blue buildings, but did you know at first they were having a difficult time entering the US Marketplace? Here is a little about why I think they had this issue and how I feel they can come to a solution best.
Central Issue
IKEA is a popular Swedish furniture company that is slowly trying to enter other world markets, on specifically being the United States. The United States isn’t a very easy market to enter into therefore IKEA has had some though times penetrating the market and becoming financially successful. According to the case study, IKEA is having a hard time entering the US market because of the weakened US economy and the inconsistency between the products currently offered in the United States’ furniture market. Therefore IKEA needs to find a healthy balance between it’s amazing strategy used abroad, but meet the consumers’ needs here in the US. IKEA’s low cost do-it-yourself strategy isn’t perfect for the US market, which is why they are also struggling.
SWOT ANALYSIS
IKEA’s strengths are extremely unique, and they definitely do things that their competition does not do. IKEA has created themselves one of the most recognizable brands; consumers see the big blue building with yellow writing and think to themselves, “oh that’s an IKEA store.” The company also has a set three principles of namely, frugality, and low cost, which shows throughout all of their company’s doings from the production to the manufacturing to the delivery to the format of the stores and the experience they are trying to create for the consumers’ upon store visits. IKEA also was smart by making their organization a nonprofit organization with hopes to promote innovation in architectural and interior design. This is seen as controversial though because IKEA cannot be bought out or taken over, and they also do not owe as much in taxes. Since IKEA is in 38 countries they are known to be Sweden’s number one export. They provide consumers with the “IKEA concept” where everything is high quality, low-cost, and sustainable. Lastly, IKEA provides additional services to their customers like childcare, vehicle rentals, design appointments, shopping supplies, and a restaurant.
IKEA’s weaknesses are definitely why they are not successful in the United States marketplace. Firstly, IKEA mainly concentrates on traditional print advertising in the form of a yearly catalog. That is not something consumers in the US will chew up, since they prefer to see advertisem*nts on TV or on the Internet. This will never happen for IKEA since their advertisem*nts typically don’t leave Europe because they are seen as super controversial, and most of their marketing budget is used on the catalog creation and printing. Along with that advertising IKEA also depends on word-of-mouth promotion, but consumers aren’t seeing advertisem*nts to get them into the stores in the first place. From personal experiences at IKEA’s they typically aren’t in the best areas either, I know I won’t be going to the one on the outskirts of Philadelphia, or the one in Elizabeth anytime soon, so the placement of their stores are also lacking. IKEA also is very unique in a sense that they really have no forms of e-commerce, consumers will be able to view all of their products online, but when they go to add something to their cart they are directed to physically go to a brick-and-mortar store to purchase the product in person. IKEA tries to create foot traffic within their stores due to the environment they are trying to create there. One huge setback for the company in the US market place is that their goods are compared to those that can be found at Wal-Mart, Target, and Home Depot, which is a huge slap in the face to this massive company that promotes innovation and wants to be desired by all. This trend is due to the DIY mentality, most consumers see DIY as a cheaper option where the goods don’t have a long lifeline and aren’t high quality. This also goes into saying that an older generation, specifically the baby boomers, would rather spend their well earned money elsewhere and know they are receiving a high quality long lasting product. IKEA also has done nothing to try to be what the US market wants, they have not came out with any other forms of advertisem*nt, they still have all DIY products, and they also have no customization within their products.
IKEA’s opportunities are even more unique to why that company has been a success elsewhere in the world. IKEA being a nonprofit organization not only is a strength but an opportunity because they can choose to grow as much as they want without worrying over another large company, maybe Costco or Sam’s club trying to take them over. This allows IKEA do create their own timelines are grow on their own as they please. IKEA is also located in 38 different countries; this gives them more profits and more branding opportunities. They are a game changer in the sense of they want to be a “one stop” shop meaning they take their strengths of having a bunch of extra services (ones listed in two paragraphs above) and they use this to keep their consumers there longer, helping to create the IKEA experience, which is one where they want the shoppers to talk the full circle in peace and enjoy all the furniture and goods IKEA has to offer, they also offer food to keep the consumers there longer, and they use it as a way to gain more profits. I know personally from my IKEA trips that I won’t eat the morning before I go because I know I can get a good, cheap meal there. So obviously IKEA is doing something right here. The company prides themselves on sustainability even to the point that they will educate their farmers in how to save water, energy, and to ensure all parts of their goods are used and if not used efficiently recycled, and because of that IKEA has to environmentally focused partnerships. Since IKEA does not have a extremely active website they use this to their advantage by offering phone applications with 3D portions where consumers can create walk through and design what they want their own rooms to look like, within this they also have a website with extensive product descriptions to make the experience at the store more convenient for the shopper. Another opportunity IKEA has is their idea of “Antibureaucracy Weeks” meaning they will place executive inside the stores helping shoppers personally. This way the executives can see exactly what is occurring inside the stores in a first hand experience and they can make the proper changes needed to ensure the IKEA concept and culture is being carried throughout at all times.
Lastly, IKEA’s threats could be why they are not super successful as they planned to be in the US market. The US already has many more personalized and traditional furniture stores, where people are already loyal to. These places will provide unique furniture, one on one experiences, and financing available. As said in the weakness the baby boomers are more likely to be spending their money here, since this option will provide the furniture that they desire more. A huge threat and issue IKEA faces in the US is that every single marketplace within the US will have different desires, those in LA will want different furniture then those in Texas, and the company just isn’t willing to work with it as of right now, therefore they are threatened by companies that will work with the different marketplaces desires. Consumers will also comparison shop, and while they are doing this they will look for the best deal that is convenient for them, and sometimes will opt for the purchase online option over having to leave the house. Lastly, there are other DIY retailers that are less of a drive, simpler, and more convenient to retailers. Other companies also offer more advertising that consumers will be able to see.
Alternative Solutions
1.Providing a more efficient web experience for consumers, and offering an order online / online exclusive section.
This would be a phenomenal idea for IKEA to help grow in the US market more because this is where they are lacking a lot. As of right now consumers cannot go online and order a coffee table and get it delivered to their house is the super economic packaging that IKEA has placed into their design and experience. Firstly, IKEA designed flat boxes to help their personal costs and the consumer costs, but there is not shipping to the consumers so where are the savings truly going, since the consumer still needs to get into their car and drive to one of the US’s 38 stores. On top of that, IKEA should allow consumers to go order online; at least in the US since this is what the market wants, US consumers want and enjoy the convenience of staying home to do their shopping. Due to work schedules getting busier, and personal time going to relaxing consumers simply do not have the time to leave their house when they have an hour of free time, and if they were to offer a bigger online platform consumers will talk to their friends about the cool furniture they were able to order online at a cheap price, helping IKEA reach their ideal of word-of-mouth advertising. Lastly for this alternative this would allow IKEA to offer products to each specific US market. Other websites/retailers like Urban Outfitters and Macy’s will offer “online exclusives,” within these exclusives are things that can obviously not be purchased in store, but they are goods that go along with that specific areas trends. The store will be saving money by not having to ship a prototype out to each store, since consumers will view the extensive description on the IKEA website, receive the 3D tour, and then be able to purchase that exclusive product. Consumers also tend to like the word exclusive because they feel as if they are getting a product individualized to them, which will also help IKEA within their weakness of consumers not believing the goods are individualized to them.
2.Concentrating more on US specific advertising and product placements.
A massive weakness of IKEA is their lack of advertising in the US. As stated before they do depend on their catalogs and word-of-mouth advertising, but clearly those are two things that the US market are not retaining and recognizing. IKEA spends most of their marketing budget on these catalogs that don’t even relate to what the US market wants, and will pay attention to. So they should spend more of their resources and money on online advertisem*nts. Maybe adding advertisem*nts on Facebook, Snapchat, and Instagram, that way consumers that they are targeting, younger cost-conscious consumers will view the advertisem*nts. IKEA should also implement a weekly, bi-weekly, or monthly email that previous shoppers or those interested in their goods can get updates on their local stores events, products, and deals. Another part of advertising IKEA can focus on is commercials, if they put commercials on TV during the day time, then numerous people will see them within their soap operas or other shows. If IKEA concentrates on this the US market will be more likely to chew them up, since this is what the market desires when it comes to advertising. Besides, the generation they’re targeting is the generation that is literally putting newspapers and all forms of print out of business because the Internet is more convenient and always accessible.
3.IKEA should really look into the areas that they are placing the stores they are trying to get consumers to visit in the US.
From personal experiences when going to local IKEA’s I have noticed they are not in the safest of areas for their targeted demographic to go visit, or even drive to. Locally our IKEA’s (near central NJ) are in Elizabeth NJ, Paramus NJ, and South Philadelphia PA. All of these are locations outside of massive and very popular target cities, where they know younger consumers are looking to save an extra buck, but will they be willing to make that 40+minute drive from their area, or pay for public transportation? Probably not, so IKEA should look into building more locations so all consumers can make it into the store. They also should look into the areas more in depth that they are places stores in. Elizabeth, and South Philadelphia aren’t the safest areas so if a younger women is going shopping alone for her new apartment she might chose a store in a safer area to drive to. More “urban” areas are extremely undesirable to their target demographic; therefore they should add more locations and look into where those locations are going to be, and what is really in the surrounding areas.
My Recommended Solution
I would recommend IKEA doing my alternative solution number two, concentrating more on US specific advertising, and product placements. This is a great solution because there isn’t just one concrete solution for IKEA when it comes to this. They can implement running an Internet campaign and this could turn into doing various promotions in store and possibly online. They can use product placement efficiently on television shows with obvious branding to make consumers see their products in use, which is also high effective. If they choose to do this strategy then they are 100% conforming with what the US market desires when it comes to how they find out about companies and their goods, they turn to TV and internet for the convenience therefore IKEA would be meeting this desire, which would lead to consumers seeing their goods not as just DIY but as a product that they need to have in their home. IKEA needs to not be stubborn and they need to move away from their own norms and comply to the target they are trying to reach, because if they do not they will continue to be unsuccessful in the US, which in turn might end up being them closing their doors and US expansion being a failed attempt.
Implementation of Suggested Solution
Implementation for my chosen solution will be very expensive and timely, but it will be well worth it for IKEA’s continuous growth within the United States. First, they would need to sit down with a marketing team that specializes in US marketing, and truly understand what the consumers of the United States wants to see and how they want to see it. This process cannot be time stamped either since effective marketing campaigns are never ending and are always piggy backing off of each other, with each campaign being more effective. IKEA should first take the knowledge from their marketing staff and decide whether an Internet campaign or a TV campaign will be more effective during this period in time. Let’s say they decide to go with an Internet campaign, they will need to look more into the analytics of those within their target market who actually uses the Internet and where they see the most usage. Since they are targeting younger people, lets say social media usage prevails among 21-32 year olds. Since this falls into IKEA’s target of younger cost-conscious shoppers, they should ultimately choose to put their advertisem*nts somewhere on social media. They can use cookies/tracking to see what social media users within this target recently looked up furniture on Google, and they can place the small advertisem*nt on the side of the screen or within their scrolling newsfeed. If this is effective they can start hinting at these users that IKEA is a great place to purchase furniture by adding in small Snapchat advertisem*nts showing the furniture in use, and then adding in sponsored Instagram postings within everyone’s newsfeeds. And there you go IKEA will have an effective social media marketing campaign. Let’s say this is so successful that IKEA wants to do more, next they can pressure all of the people viewing their ads and previous buyers to sign up for an email list, and with this list IKEA can send out weekly, bi-weekly, or even monthly promotions to those who opt-in or purchase something. So now more people are seeing the brand pop up, and this is effective because consumers are always on their phones and checking their emails actively, so even though they might delete the email, giving IKEA a high bounce rate, they are still noticing that IKEA is reaching out to them for some sort of promotion. IKEA can also post about in store happenings, like all of the fundraising events and classes they hold on their social media accounts, that way people who like/follow their page are seeing that the store is active, and instead of having buying a couch in mind, they will be thinking more about the event which will get them into the store where they will then purchase (hopefully) an item they fall in love with and see as desirable.
