Question:
How did IKEA revolutionize the furniture industry?
What was furniture shopping like before IKEA, and what strategies did they introduce that changed everything? Sept. 1, 2022
Answer:
IKEA is a highly innovative worldwide manufacturer and retailer.
Few people remember the global challenges faced by the company during its earlier days and the multitude of major innovations needed to overcome those challenges.
I first encountered IKEA during the 1970s when it was just beginning to enter the American market.
At that time, I was a buyer for a large Top 50 furniture retail chain.
The company I worked for sold a wide variety of furniture products at all price points.
The cheapest furniture items were small KD (Knockdown) pieces, made with plastics, low pressure melamine fiberboard and packed in flat boxes.
This cheap KD furniture included low-cost entertainment centers, bookcases and occasional tables.
Other cheap (non-KD) furniture sold in the store included plastic copies of classic designs that had originally been made in wood.
Moulded plastic cocktail and end table sets were big sellers.
Before IKEA, KD (Knock-down) furniture was sold primarily as loss-leaders.
Loss leaders were items advertised at very low profit margins.
Their primary purpose was to bring additional customers into the store so that they would also buy more expensive (more profitable) furniture.
Because of the low cost of cheap KD furniture, boxing and packaging costs were also minimized.
As a result, KD furniture had a high rate of damage during shipping and delivery.
[Note – the term RTA (Ready to Assemble) was introduced during the 1980s to differentiate better quality self-assembly furniture from cheaper KD pieces.]
My first visit to an IKEA store was a revelation.
There were three different major innovations that hit me immediately:
Simple and functional designs
IKEA wastes very little cost on ornamentation that does not have a functional purpose.
The simple, modern look is more cost-efficient than traditional or transitional styling.
Customer education
Large cards clearly described the features and benefits of each piece.
Product descriptions included detailed explanations of the low-cost materials used to make the furniture.
Testing
IKEA introduced the concept of product testing to both the furniture industry and the general public.
Rigorous product testing was combined with consumer education to emphasize product quality.
IKEA customers are fully informed about the company’s thorough product testing.
Easily readable point-of-purchase signage explained how the furniture is tested.
This built customer confidence in the durability and safety of IKEA’s low priced furniture.
IKEA was also the first furniture company to test packaging.
Improved packaging resulted in a dramatic decrease in shipping damage rates.
Shipping costs were reduced while simultaneously improving confidence in the furniture’s quality and reducing customer complaints.
Packaging was carefully engineered to maximize the number of boxes that could fit into each ocean shipping container.
After visiting IKEA for the first time, I remember going into the next weekly buyers meeting at my company.
I enthusiastically described some of the innovations I had witnessed.
I was convinced that several of IKEA’s in-store innovations could immediately improve sales at our stores.
Providing customers with detailed product information on each piece seemed like such an obvious marketing improvement.
My recommendations were turned down flat by the store’s merchandise manager and owner.
Changing things would be “too much work.”
None of the other “traditional” furniture stores I knew adapted IKEA’s customer education oriented approach until decades later.
IKEA revolutionized the furniture industry in other ways.
Before IKEA, the U.S. furniture industry was made up exclusively of small and mid-size manufacturers and retailers.
Very few furniture companies reported annual sales above $100 million.
Thousands of small and mid-size furniture manufacturers and retailers that flourished in the 1970s no longer exist.
The Top 10 largest U.S. furniture retailers (including IKEA) now account for 50% of total U.S. furniture sales.
All have annual sales exceeding $1 billion.
IKEA was the first furniture company to unify manufacturing, distribution and retailing on a global scale.
IKEA’s innovations were so radical that they completely disrupted traditional business models.
IKEA redefined home furnishings as a unified “lifestyle” instead of individual products.
This lifestyle approach expanded the product mix into both furniture and non-furniture items.
Basic modern designs were simple, inexpensive and functional and could be coordinated with other IKEA products.
IKEA was the first to design, produce, and market products based on a unified model.
The unified model combined form, function, cost, marketing and materials.
IKEA recognized that product design could address and resolve systemic inefficiencies that had become ingrained into furniture manufacturing and distribution.
Some of the challenges that needed to be addressed included::
The most efficient worldwide manufacturing sites were far removed from the biggest retail market distribution locations.
Furniture was a bulky product that could not be shipped efficiently (or safely) over long distances.
The use of low cost engineered wood products and plastics for furniture had been broadly shunned by furniture shoppers due to a general perception of unacceptably inferior quality.
IKEA furniture has simple but distinctive styling and design parameters.
To minimize costs, all IKEA furniture is designed to be packed into flat rectangular boxes for inexpensive shipment worldwide.
The size of the flat boxes is carefully engineered to maximize the number of pieces that will fit into a shipping container.
All furniture must be easy to assemble. (Although there are many jokes about difficulties assembling IKEA furniture, they have pioneered advances in furniture assembly technology.)
Many furniture items use interchangeable parts that can be used on multiple products. This increases manufacturing efficiency.
The universal efficiencies that are built into IKEA’s global manufacturing, distribution and retail marketing systems make the company a formidable market force with no real competition.
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