Introduction

In today’s retail landscape, the ability of any company to adapt to the shifting tides of consumer
preferences is very important. It is the most important factor on which its success relies. In light
of this idea, this report explores and proposes a redesign strategy for IKEA. IKEA is a globally
acclaimed titan within the furniture and home goods industry. This report uses diverse marketing
theories and strategic frameworks. It is complemented by innovative and forward-thinking
redesign recommendations. The main aim of the report is to solidify IKEA's position as a leader
in the retail sphere. Simultaneously, it also plans to enhance the overall shopping experience for
its clients. The goal is to align IKEA's offerings more closely with the evolving needs and desires
of its target demographic.

Overview of IKEA

Product Sector

IKEA is a major player in the furniture and home goods industry. For years, it has served as a
go-to destination for various kinds of furniture products (Loeb). These products range from
furniture to décor, kitchen appliances, and various accessories. One of IKEA's key strengths lies
in its ability to provide affordable designs. It attracts a very wide range of consumers. Whether
it's a sleek sofa or innovative storage solutions, IKEA offers an extensive range of products for
every purpose.

In addition to affordability, IKEA is very famous for its emphasis on innovation and
sustainability. IKEA has recently collaborated with a lot many designers and craftsmen to
develop eco-friendly materials (Mahalakshmi et al.). Interestingly, this commitment to
sustainability is in direct accordance with the growing consumer trend towards environmentally
responsible shopping choices.

Target Market
IKEA's target market is predominantly comprised of young adults and families. It’s basically the
ones who are in search of cost-effective solutions for their home furnishing. This demographic
segment represents individuals who are typically setting up their first homes. They also include
individuals who are renovating existing spaces or expanding their living arrangements.

Moreover, IKEA's target market appreciates modern design aesthetics. It is synonymous with the
offerings of IKEA. IKEA has been famous for sleek furniture pieces to stylish home accessories.
These product offerings are tailored to cater to the contemporary sensibilities of its customer
base.

Furthermore, IKEA's target market goes beyond individual consumers to families too. They
usually look for practical and family-friendly solutions. That’s why IKEA offers a wide range of
minimalistic and cost-effective furniture. “IKEA’s aesthetic is pared down and minimalistic,
which is not an accident. Uncomplicated forms with very little applied decoration are easier to
manufacture. More can be produced in a shorter amount of time, increasing efficiency and
decreasing production costs”(CatClifford).

Retailing Company Structure

IKEA's structure stands out because of its new concept of flat packing and self-assembly
furniture. This approach has basically revolutionized the furniture industry. The core of IKEA's
business model is the practice of flat packing. Here, products are packaged in compact and
standardized boxes. Due to this, IKEA has been able to optimize its logistics processes. This
reduced both manufacturing and transportation costs (Verley). This approach also minimizes
material waste and increases operational efficiency.

Moreover, IKEA has always put emphasis on self-assembly furniture. This supplements its
unique retailing company structure. This is basically a step towards customer empowerment.
IKEA enaables its customers to assemble all the furniture products themselves. This DIY
approach prmotes a sense of ownership and accomplishment.
Marketing Theories and Strategies at IKEA

To see the marketing theories, we will focus on two key strategies as discussed in our module on
retail branding.

Segmentation

Segmentation is a fundamental aspect of IKEA's marketing strategy. It basically allows the

company to divide its market into distinct groups. This division is based on factors such as
demographics, psychographics, and behavior.

Demographic segmentation involves categorizing consumers based on factors such as age,

gender, income, and family size. IKEA recognizes that young adults and families with children
have different furnishing needs. This is different from older individuals or empty nesters. That’s
why, IKEA targets specific demographic groups with relevant product offerings and messaging
(Arun). IKEA can maximize its marketing impact and appeal to a broad spectrum of consumers.

Moreover, IKEA also used phshographic segmentation. Psychographic segmentation focuses on

understanding consumers' lifestyles, values, and attitudes. IKEA knows that customers value
affordability, practicality, and modern design aesthetics. That’s why it aligns product assortment
and marketing communications with these psychographic attributes. IKEA is also famous for
building a strong emotional connection with its target audience (Neal).

Additionally, there is also a use of behavioural segmentation. Behavioral segmentation involves

analyzing consumers' purchasing behavior and patterns. IKEA observes that its customers are
often price-sensitive and value-conscious. For the same reason, it offers competitive pricing,
convenient shopping experiences, and incentives such as loyalty programs.

Positioning
Positioning is another critical element of IKEA's marketing strategy. It defines how the brand is
perceived in the minds of consumers relative to competitors. IKEA positions itself as a provider
of affordable yet stylish home furnishings.

Central to IKEA's positioning is its commitment to offering high-quality products. It also boasts
about prices that are accessible to the masses. The company's tagline, "Affordable Solutions for
Better Living," sums up this value proposition. It basically highlights IKEA's mission to
democratize design and make well-designed home furnishings available to everyone.

Moreover, IKEA also differentiates itself from competitors by exploiting its distinctive brand
image and identity. With its iconic blue and yellow logo, minimalist store layouts, and
Scandinavian-inspired designs, IKEA has cultivated a unique aesthetic (Dutt). IKEA's
positioning is further reinforced through its innovative marketing campaigns. IKEA has always
tried to showcase its products in aspirational yet accessible ways. An example of this can be
annual catalog releases and experiential showroom events.

Competitor Analysis

IKEA operates in a fiercely competitive market. It faces challenges from both traditional brick-
and-mortar retailers and online e-tailers. Let's apply Porter's five forces to the IKEA model.

1. Threat of New Entrants:

Barriers to entry in the furniture industry are high. This is due to factors like economies
of scale and brand reputation. However, online platforms have lowered these barriers
recently. For instance, companies like Article and Burrow have entered the market with
direct-to-consumer models (Clade). They offer stylish furniture at competitive prices as
of IKEA.

2. Bargaining Power of Suppliers:

IKEA's global supply chain management has helped mitigate risks. However, there is
always a risk of disruptions. For example, during the COVID-19 pandemic, disruptions in
the supply chain affected many retailers, including IKEA. Competitors like Ashley
Furniture Industries have established supplier relationships. That’s why they navigated
these challenges more effectively.

3. Bargaining Power of Buyers:

Online e-tailers like Wayfair provide customers with a wide selection of products and
competitive pricing. This has increased their bargaining power. Wayfair's strategy of
offering frequent sales empowers buyers to seek out the best deals (Light). This puts
pressure on competitors like IKEA to match or exceed these offers.

4. Threat of Substitutes:

The rise of second-hand marketplaces such as Facebook Marketplace and Craigslist

presents a significant threat to IKEA. Consumers can find gently used furniture at lower
prices. This reduces the need to purchase new items. Additionally, DIY trends encourage
consumers to repurpose or refurbish existing furniture.

5. Competitive Rivalry:

Competitive rivalry is intense in the furniture industry. All players are constantly
innovating to gain market share. Online e-tailers like Wayfair have disrupted the market
by offering a vast selection of products. Additionally, traditional retailers like West Elm
and Crate & Barrel compete with IKEA by targeting similar customer segments with
stylish and affordable furniture lines.

Redesigning Outlets, Website and Other Features

In today’s world, it is very important to optimize physical outlets, websites, and mobile apps.
This helps brands to stay competitive. For IKEA, making these platforms better presents an
opportunity to improve the customer experience. Let's explore each aspect and provide examples
of how to do the same for IKEA.

Outlets:

Physical outlets are the cornerstone of IKEA's retail experience. They offer customers the chance
to interact with products firsthand. To enhance this experience, IKEA could focus on several key
areas:

1. Store Layout and Navigation: The first step that IKEA needs to take is to optimize store
layout and signage. IKEA can make it easier for customers to navigate through its vast
product offerings. It has already done that, but it needs to build further like companies
such as Apple. For example, companies like Apple prioritize open layouts and clear
signage to guide customers seamlessly through their stores.

Source: IKEA

2. Inviting Display Setups: Another step for IKEA IKEA can be creating immersive and
aspirational display setups. They should showcase its products in real-life settings.
Companies like Anthropologie are known for their visually stunning displays. This has
been linked with inspiring customers and encouraging exploration (Hesterberg).

3. Innovative Technologies: It is a known fact that using technologies such as augmented

reality (AR) for virtual room planning can revolutionize the shopping experience.
Examples include Lowe's "View in Your Space" AR feature. This allows customers to
visualize how products will look in their homes before making a purchase. IKEA has
launched an app for this purpose, but there is no such offering at physical stores
(Ayoubi).

Website:

In today's digital age, a user-friendly website is very important. It is the main tool for attracting
and retaining customers. IKEA's website should include

1. Intuitive Navigation: Streamlined navigation and clear categorization make it easy for
customers to find what they want. IKEA's website lays out the necessary components, but
it also adds unrelated details which confuse the customers (figure attached). In the figure
below, we can see that there are different tabs for different furniture preferences. In such
a scenario, there was no need to add a tab for “new”, or it should have been in a different
colour. Similarly, in Figure 2, the departments tab is there, although there is already a list
of departments given before.

IKEA’s Website Interface (Fleming)

IKEA’s Website Interface (Fleming)

2. Personalized Product Recommendations: Utilizing data analytics, IKEA can offer

personalized product recommendations. These recommendations should be made
according to each customer's preferences and browsing behaviour. In the figure below,
the customer searched for a leather sofa. However, recommendations of related products
emerged. That’s how the IKEA website should work in all countries. Retailers like
Netflix and Spotify already use algorithms to curate customized content for users.

Personalized Product Recommendations

3. Seamless Checkout Processes: A good idea for IKEA is to simplify the checkout
process. The current website takes one through a lot of steps to make a single order.
That’s why they should add features like one-click ordering and multiple payment
options. This can reduce friction and increase conversion rates.\

4. Integration of User-Generated Content: IKEA needs to incorporate country-specific

user-generated content such as product reviews and photos. It already has this generic
feature, but furniture wear and tear is greatly affected by the country’s weather and
demographics. That’s why they need to add country-specific user-generated content. It
can build trust and credibility among potential customers. Websites like TripAdvisor and
Yelp already rely on user-generated reviews to help users make informed decisions.

App:
Mobile apps play an increasingly important role in retail. IKEA's app redesign could include the
following features:

1. Store Locator: A very important thing that IKEA needs to bring is a store locator
feature. It will help customers find nearby IKEA locations and navigate to the store with
ease. In the figure below, there is an example of a store locator. Something similar needs
to be integrated into the IKEA app, which should apply to all the locations. This would
certainly increase customer footfall and sales in general.
Store Locator (Store Point)

2. Real-Time Inventory Updates: Another feature that needs to be incorporated into the
IKEA app is real-time inventory updates. The exact number of pieces available in a store
or online should be visible to customers. This will basically ensure that customers have
accurate information about product availability. Moreover, it may also drive sales due to
the fear of missing out.

3. Augmented Reality (AR) Functionality: One smart feature that can be incorporated
into the app is AR. This virtual furniture placement allows customers to visualize how
products will look in their homes. For now, IKEA allows visualizing only to the extent of
creative rooms which are made in the app itself. However, this should allow customers to
experience the same with their actual rooms. IKEA can follow the model of the Houzz
app. It has AR features for visualizing furniture and décor in real-world settings.
AR Feature of Houzz App (Jones)

General Ambience

In today’s world, it is very important to create a welcoming and inspiring store environment. To
achieve this, IKEA should consider the following:

1. It can incorporate elements of Scandinavian design. This would include things such as
clean lines, minimalist aesthetics, and natural materials. This will reinforce the brand's
identity and aesthetic appeal.

2. IKEA can also utilize innovative store layouts and spatial design techniques. This will
create inviting and immersive environments (William).

3. One idea can be bringing interactive features and experiential zones within stores. This
would include demo areas and product showcases. The purpose is to provide hands-on
experiences and encourage customer interaction.
Experiential Zone in a Beauty Store (Klaassen)

Interior Design, Lighting, and Decor

In-store, IKEA should pay attention to interior design elements such as lighting, signage, and
display fixtures. This is to make the space visually appealing. To enhance the in-store
experience, IKEA could consider:

1. One step can be the strategic placement of furniture vignettes and room displays. It is to
basically inspire customers and facilitate product visualization.

2. Another necessary feature is the creative use of lighting. This is to highlight key product
areas and create ambience within the store (Schielke).
3. IKEA should also use clear and informative signage to guide customers. The primary
purpose should be to help customers locate specific products or departments.

Information Signage in a Store

Market Position and Marketing Communications

IKEA's strategic marketing approach can be analyzed using the Ansoff Matrix.
1. Market Penetration:

IKEA can focus on increasing market share within its existing market segments. For this,
it would need to focus on its core themes of affordability, sustainability, and design
innovation in its marketing communications. This strategy involves attracting more
customers to its stores and website. This also involves encouraging existing customers to
make repeat purchases.

2. Product Development:

IKEA can also use product development strategies to introduce new products or
variations of existing products. However, it needs to keep in mind that they align with its
brand values and meet customer needs. This strategy involves expanding IKEA's product
range to cater to a broader audience. This also involves launching innovative products
that differentiate the brand from competitors. An example of this can be that IKEA
develop a new line of sustainable and eco-friendly furniture. This would be made from
recycled materials or renewable resources.

3. Market Development:

IKEA can enter new geographic markets or target new customer segments with its
existing products. This strategy involves expanding IKEA's presence globally or reaching
untapped customer segments within its current markets. For example, IKEA could focus
on expanding its presence in emerging markets such as India or Brazil. Or maybe it
focus on areas where there is a growing demand for affordable and stylish home
furnishings.

4. Diversification:

IKEA can explore diversification strategies to enter new product categories. It may also
enter industries that are complementary to its core business. This strategy involves
lIKEA's brand reputation and expertise to expand into related areas. Moreover, the main
aim would be to capture additional revenue streams.

Management and Customer Service

We all know that effective management and customer service are very importnat for success. To
strengthen its position, IKEA needs to prioritize customer satisfaction and introduce some new
management policies.

Real-time Communication Channels

Nowadays, real-time communication channels are a necessity. Their purpose is to address

customer inquiries promptly. That’s why IKEA should use live chat and social media platforms
to engage with customers in real-time. For this, it can use chatbots to provide instant responses.
We already have an example of Amazon. It utilizes real-time communication channels to engage
with its customers (Chaffey).

Information Presentation and FAQs

A well-informed customer is a satisfied customer. IKEA needs to introduce detailed FAQs and
product information. It can also use multimedia content such as video tutorials and product
demonstrations. Apple's website is a prime example of effective information presentation. Apple
provides detailed product information, FAQs, and video tutorials.

Personnel Roles for Online Functions

The most important thing is that IKEA should allocate dedicated personnel roles for managing
website maintenance. Then, there should be separate people for order fulfillment and customer
support. IKEA may already have such division but it needs to further create divisons for efficacy.
Moreover, it should also focus on Cross-training employees across different departments. This
ensures operational flexibility and will save cost in case one division has less personnel.
Conclusion

In conclusion, this report has provided an in-depth analysis and strategic recommendations for
IKEA. This report has highlighted all key areas for IKEA to focus on to maintain its competitive
edge. By using positioning and segemntaiton, IKEA can better understand its target audience.
This will allow for more effective targeting and differentiation. Moreover, redesigning outlets,
and websites can enhance the overall customer experience. Additionally, we know that IKEA
continues its international expansion efforts. Therefore, it needs to establish a centralized
management structure and adapting to local market preferences.
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