Chapter 16 Real Choices at IKEA
Chapter 16 - IKEA Instructions IKEA, currently the world’s largest furniture retailer, was founded in Sweden in 1943. The early years consisted of selling pens, pictures frames, wallets, and other bargain items out of a catalog. Today, the company generates over $23 billion in annual sales from stores which focus exclusively on the furniture and home decorating market, located all over the world. IKEA retail locations are roughly three times the size of a typical Home Depot. In designing its store layout, IKEA is responding to consumer interest in one-stop shopping—finding what the consumer wants in one store rather than having to visit numerous stores. In addition, IKEA makes it easier for customers to shop once they enter the store. It sets up furniture displays in “lifestyle” themes that show the type of furniture that singles, couples, or young families might need. The company also uses vignette displays to suggest how a customer can put together various items to create a certain look. These types of displays are perfect for the generation that is no longer interested in buying furniture to last a lifetime but rather that fits their lifestyle now. Presently, one of the most important decisions facing IKEA is how and where it should look to expand its business and its revenues. The company has announced its desire to add new store locations in Russia, Germany, France, China, Italy, Japan, U.K., Finland, Spain, and Switzerland. However, IKEA is more than just a bricks-and-mortar retailer. In recent years, the firm has also become a popular online store. Its website is very popular; it got 450 million hits during the year 2007 alone. Despite its renown among online furniture shoppers, IKEA recently announced plans to focus on the instore experience as “the only sales channel.” It does not plan to invest more money in home shopping or online sales channels. The company bases this decision on its belief that the chain can give customers the best offers and the lowest prices when it makes its products available only through its bricks-and-mortar stores. Despite IKEA’s successful history, there are no guarantees for the future in the hyper-competitive world of retailing. Is focusing solely on the in-store experience the right decision? Can IKEA reach its growth and revenue goals without online sales? In the U.S. alone, Internet sales of home furnishings are over $150 billion a year, and industry experts forecast continued annual growth at double-digit rates. Would IKEA be better to continue to push online sales at least in some areas of the world? 1. What is the decision facing IKEA? 2. What factors are important to understanding this decision situation? 3. What are the alternatives? 4. What decision(s) do you recommend? 5. What are some ways to implement your recommendations? Attachments Chapter_16_Real_Choices_at_IKEA.docx (12.98 KB)