About IKEA
IKEA is a Swedish-based conglomerate specialized in designing and selling ready-to-assemble furniture for homes and offices. They also sell kitchen appliances and home necessities all under one roof. IKEA was founded by Ingvar Kamprad in Sweden in the year 1943. IKEA is an acronym consisting of the initials of his name followed by his farm name and village. In this article we will see about Why Is IKEA So Cheap?
Spread across 41 countries, IKEA is named the largest retailer in furniture and appliances. With the fastest-growing competition, staying number one is not an easy task. IKEA attracts its customers with affordable unique designs of furniture, and their customer relationship is a goal.
Though IKEA operates with a huge volume of customers, the products are cheaper compared to other retailers in the industry. There are many reasons as to how the products get sold at a lesser price.
How does IKEA offer affordable products?
The reasons why IKEA is making cheap-priced products and how they survive the industry as the top retailer since 2008 are:
Materials Used
According to IKEA’s website, the furniture gets made of wooden sheets layered over a honeycomb core. This construction material will save IKEA a lot of money.
Bulk Manufacturing
IKEA makes furniture parts in bulk order which means they get their material supplied at a much lower rate or discounted rate.
Flat Packaging
IKEA’s idea of flat packaging takes less space and materials, and hence the pricing is low compared to other brands. The concept of flat packing was introduced by the founder Kamprad by which IKEA saves almost $175k annually. Also, with the flat packaging, the wastage of materials is reduced.
Manufacturing Materials
The IKEA products are made in such a way that sheets of plywood are layered over a honeycomb-like structure and this is comparatively cheap.
No delivery services
IKEA doesn’t provide delivery services for their customers, and only pickup at the store options are available. It cuts delivery costs and saves a lot of money for transits. Unlike many other retailers who offer delivery options and charge additionally for the same, IKEA sells at a much lesser price.
Limited Staff
You can not find many sales associates at IKEA stores. Every IKEA product comes with a tag that gives the complete information of the product along with the dimension and material description. This cutting down on extra labor costs helps IKEA price their products cheaper.
Assembly costs
Every IKEA furniture comes with a manual to guide with assembling. Also, in 2017, IKEA collaborated with Task Rabbit for helping customers with furniture assembling. This has reduced the huge cost of collaboration with third-party vendors.
Store Capacity Planning
Every IKEA store is planned in such a way that their shelves are used effectively and no wastage of space is practiced.
In-House Operation
IKEA has everything controlled by itself and most of their process is taken care of in-house this saving a lot in this. Right from manufacturing to packing, IKEA warehouse handles all the operations without any intervention from third party vendors
Power Saving
IKEA has set around 900,000 solar panels across its warehouses and outlets and inhabits and utilizes 441 wind turbines all in the quest of coming to be energy independent by 2020. This is necessarily respectable considering that there are 424 IKEA stores across the world that require a huge quantity of fuel and energy to operate.
Affordable Meals
All IKEA stores do have their food hall offering meals at affordable prices. Compared to their competitors, food at IKEA is priced way too low. Almost 30% of the customers shop at IKEA for their affordable meals. Shoppers love the idea of having meals at greater prices after shopping under the same roof.
Store Locations
IKEA stores are located in such a way that the local demography consists of students, tenants, and young families in the majority. This idea is to attract these potential customers to the stores with the urge to do makeovers for their homes.
Minimalist Designs
IKEA products are designed keeping minimalism in mind. They can be redesigned to cater to other needs and this is one of the many attractive factors for customers.
Conclusion
Now we have learnt Why Is IKEA So Cheap? IKEA makes strategic business moves by making considerable savings on transport, creation, labor, and manufacturing costs. These savings are constantly put into the manufacturing of low-priced home products. Meanwhile, IKEA attempts to produce high revenues to maintain inexpensive furniture by increasing repeat buyers, selling inexpensive food, and building sustainability.
Frequently Asked Questions
- What promise does IKEA make in terms of values?
IKEA stands by its motto “ To create a better everyday life for the many people “ by selling furniture and other household products at a cheaper price. This provides better accessibility to a standard of living for as many people as possible.
- Who are some of the competitors of IKEA?
The competitors of IKEA are Walmart, Target, Amazon, and Wayfair to name a few.
- What does IKEA do better than its competitors?
IKEA is different from its competitor because it offers modern furniture at affordable prices.
