IKEA’s total sales have been growing in the past six years. The fundamental reason is that IKEA has always adhered to the cost leadership strategy, that is, the modular furniture design method and the IKEA effect. What kind of business model does IKEA have today? The following is IKEA’s business model that I compiled for you. I hope you like it.
IKEA’s business model
The business model has five components: customer positioning, value proposition, value chain extension, dynamic capabilities and revenue model. Among them, customer positioning and value proposition are related to the characteristics of the enterprise, are relatively fixed, and determine the nature of the enterprise; the other three elements change with the changes in the business activities of the enterprise, reflecting the personality and diversity of the business model. Due to their different positioning and value propositions, different types of home furnishing retail companies need to integrate social resources, dynamic capabilities and the ability to obtain cash flow. This reflects different control over network resources and forms different business models. This article defines four typical business models of home furnishing retail companies based on customer positioning and value proposition.
1. Simple Home Furnishing City Model
The retail mall mainly provides house rentals and properties for home furnishing manufacturers, with simple management consulting and government relations services, such as industrial, commercial and tax relations coordination, without It is necessary or rarely necessary to use social service agencies to serve the settled enterprises. The competitiveness of retail malls is only reflected in low rents or preferential tax policies.
2. Multi-brand supermarket management model
Retailers purchase the required products from suppliers. The products are divided into different areas according to building materials, home appliances, furniture, etc., and each area is concentrated according to categories. exhibit. Retailers operate independently and there are no franchisees to jointly bear risks. Its biggest advantage is that it has clear customer positioning and implements unified procurement, unified marketing, and unified settlement; its weakness lies in its weak dynamic capabilities and value chain. In addition to selling home products, it provides few other services to consumers and has relatively limited network resources. There are few and the income model is single.
3. Brand centralized display mall management model
This type of retailer rents out stalls to higher-end brand manufacturers. There is a cooperative relationship between merchants and stores, and stores and brands. The parties agree to bear costs and risks together. Home furnishing products are all first-line domestic and foreign varieties, mostly mid-range, and are organized into product groups to attract consumers. In addition, in order to bring additional profits to the company, this business model introduces financial capital into the home furnishing industry, with stores and well-known manufacturers becoming key investment targets. At the same time, the store itself is fully equipped, and the supporting facilities of the business district include after-sales service, catering, and leisure.
4. Private brand shopping mall management model
Retailers collect, organize, and analyze consumer demand information and requirements for certain types of goods, and propose new product functions and prices. , shape and other aspects of development and design requirements, and choose a suitable production enterprise or design and produce by yourself, and add your own trademark or label to the goods sold for sale.
Analysis of IKEA’s business model
1. Market positioning
Creating a better daily life for most people is what IKEA has been working hard to do since its inception direction. The IKEA brand has always been associated with improving people's quality of life and adhering to the business purpose of "providing as many customers as possible with affordable, well-designed, functional and low-priced home furnishings". IKEA's target customer group is mainly between the ages of 20 and 45. The target consumers are young people who want high style but cannot afford high prices. They are very willing to sacrifice services in exchange for lower costs.
2. Control of independent brands
The concise brand logo symbolizes the trustworthiness, durability and simplicity of household products. IKEA emphasizes product simplicity, nature, freshness and design. Sophisticated and unique style. IKEA cleverly uses geometric shapes to create a unique and meaningful brand identity. The brand logo reassembled from these old elements naturally reminds people of the industry characteristics of IKEA, and at the same time gives people a sense of stability and simplicity.
In addition, IKEA has always insisted on designing all its products by itself and owning its patents. Every year, more than 100 designers work crazily day and night to ensure that "all products, all patents". This not only takes advantage of the procurement process, but also truly integrates products and channels.
3. Pricing first, R&D later
IKEA adopts the pricing first, R&D approach, breaking through the traditional thinking of producing first and then considering pricing based on cost. During the design process, the first thing the designer gets is the sales price of the product. Then, based on this, the designer will start with the design style and design structure. Finally, the designer will work with manufacturers who can provide the price system. work, and complete the entire process of material selection, proofing, shaping and packaging at the same time. This will ensure the low-cost advantage of IKEA products, and once launched, they will definitely have a strong competitive position in the market. Secondly, the source of R&D information adopts an outside-in approach, abandoning the previous traditional research method of large-scale consumer surveys. All information is provided by consumers in all aspects of their inquiry, procurement, design, service, transportation, etc. , strengthens the interaction between developers and consumers, and grasps the real needs of the target group.
4. Modular design method
IKEA invented the modular furniture design method. IKEA's furniture is all disassembled and assembled. The products are divided into different modules and designed in blocks. Modularity means that mass production and large-scale logistics are possible. Different modules can be produced in different regions according to cost. At the same time, some modules can also be used universally among different furniture. In this way, not only the design cost is reduced, but the total cost of the product is also reduced, achieving an organic unity that meets basic functions and personalization, and ultimately maximizing cost-effectiveness.
5. Optimization design strategy
The so-called optimal design is to find a design solution that can meet all design requirements and require the least expenditure. For example, IKEA pioneered the technology of painting fiberboard. This approach has always been suitable for low-stretch surface materials of relatively low-priced products. However, IKEA not only uses this technology on its kitchen product Varde, but also combines 5 materials to reduce the cost of production materials. Varde’s most expensive material is used for exterior engraving, and the cheapest material is used inside the drawer to save money. The cost is used for high-quality hinges and handles, which not only ensures the low price of the product, but also makes the product have noble quality.
6. Technical material innovation
IKEA continues to use new materials and new technologies to improve product performance and reduce prices. At first, the Ogla chair was produced from wood. As the market changed, its price became too high, so flat packaging was used to reduce costs. When flat packaging could not meet the low-cost requirements, IKEA designers used composite plastic instead of wood. Later, , in order to further reduce costs, IKEA introduced a new technology into the furniture industry? By injecting gas into composite plastics, it saves material and reduces weight, and can produce products faster. The purpose of this repeated modification is very simple, which is to reduce resource consumption and packaging and transportation costs while ensuring quality, and let innovation serve costs.
The founder of IKEA
The founder of IKEA, Ingvar Kamprad, was born in 1926 in Smaland, southern Sweden.
He grew up on the farm of Elmtaryd, near the small village of Agunnaryd. Ingvar was determined to start his own company when he was young. At first, he sold matches to his neighbors on his bicycle. He discovered that he could get very cheap prices by buying matches in bulk from Stockholm, and then retail them at very low prices while still making a decent profit. Later, the scope of his business continued to expand, and he began to sell fish, Christmas tree decorations, seeds, ballpoint pens and pencils, etc.