IKEA’s Business Model
By Alisa Chen
November 2024
… is pretty awesome.
Have you ever gotten lost in an IKEA store? I personally haven’t, but as an irresponsible bystander, I’ve watched more than two toddlers standing alone and crying in a random doorway before. To some extent, IKEA purposely wants you to get lost! Stores are formatted in a confusing way that guides customers through a maze all throughout the store, often without them realising. That way, you’re less likely to grab the singular KNUBBIG you came for and leave immediately after. If you’re in a time crunch, that singular lamp will take time to find; many products are placed seemingly carelessly, as if they’re in the wrong category. Your incentivised - whether of spite or of lostness - to keep walking.
Speaking of incentivisation, IKEA showrooms are phenomenal. Notice how they’re clean, compact, colour-synched, and beautiful. Whenever I go to IKEA, there’s a magnetic attraction between me and the display PÄRUP. Why is the furniture never this chique-looking when it makes it to my house? Why are other companies’ versions of showrooms never this awesome??
I get tired from hurling myself onto beds by the end of my trip, so of course, I have to make a pit stop at the IKEA food area, conveniently (but not mistakenly) located near the end of the maze. There, with family and kids meal deals alike, everyone feels welcome. The children are retrieved from the magical IKEA playground, and the family shares some laughs together at the comforting dinner table of their second home. How’s that for a business model?
At the end of the day, IKEA is a for-profit business. It may not seem obvious at first, but if you analyse the business on face, something differentiates IKEA from other furniture companies and is bringing in enormous profits. That “something” is flat-packing. IKEA’s chairs, tables, and bookshelves alike are packed in flat cardboard boxes for customers to assemble themselves. This implies a multitude of things:
Less storage costs; flat boxes intuitively take up less space than a fully furnished BILLY.
Less transportation costs; customers can haul their loot home in their car trunks
Less labour costs; IKEA isn’t building that BILLY, you are.
PROFIT!
All the while giving customers that unique experience, and perhaps family bonding time, of using a screwdriver for the first time!
While it’s true that IKEA’s business model tricks people into thinking they’re getting a bang for their buck, it’s also true that people are happy about it. I would count that as a win-win.