Question

IKEA is also very "IKEA-centric." For example, the IKEA store itself will be laid out as a maze that requires customers to walk through every department before they reach the checkout stations. This forced path can seem constraining to their customers who naturally are more free spirited than the IKEA management model. What are the positives and the benefits of the IKEA way?

Answer 1

Each company has their own way of management in which they enhance the overall customer experience by providing them the services or products in a certain way. This makes sure that the offerings of the company are different from the competition in one way or the other and allows for profits to accumulate over a period of time respectively.

In the recent years, IKEA as a company has gained by and large due to the way in which it has functioned. It was founded in the year 1943 by Mr. Ingvar Kemprad who is eighth in the list of top earning people across the globe.

In the case, IKEA's floor management strategy is described which has created long term success for the company and has allowed it to sell its products in a better way to the end customer. The positives and benefits of having a maze like structure on the floor is as described as follows:-

1) Repeat Purchase by Customers:-

The whole idea of having a maze like structure is to create an image in the mind of the consumers about various goods and services being offered by the company. In most cases complimentary goods are placed close to each other. Such as a side drawer would be placed close to a bed. This would allow people to think over a repurchase in the same transaction or in the ones to follow.

Repeat purchase in today's time is extremely important for a company as it allows the firm to retain customers in the long run which enhances the overall profits.

2) Better Inventory Management and Sales:-

Placing similar products together, and allowing the customer to view all products that the company offers before they make the final payment has shown to increase the overall sales of the company.

This happens because many customers end up buying products which they had not hoped to buy because of the display itself. This is one of the key reasons, IKEA despite being a furniture company which tends to be a slow seller has been able to manage its inventory in the best possible manner and has seen increased sales across the globe over a period of time.

3) Impulsive Buying and Altering Customer Behavior:-

The main benefit which IKEA's maze strategy has is that customers know that they cannot return back to the same place without getting into the store or line again. Further, because of the fact that the goods are relatively cheap and are aligned in a manner that similar products are aligned close to each other causes impulsive buying which has altered customer behavior in which they go to an IKEA store and purchase much more than they ideally would.

4) Increased Revenue and Overall Profits:-

In the end, because of the fact that IKEA has been able to alter customer behavior in its favor and it has become easier for them to sell their products, their overall revenue and profit margins have increased over a period of time respectively.

Conclusion:-

This highlights, that a simple strategy that changes the design of the floor can make a big change to a company's revenue. The idea behind buying IKEA's furniture is that it is cheaper than competition and easier to install. This strategy is applied in the store design as well making it convenient for the customers to have all options under one roof close to each other, which makes impulsive buying and customer retention easier thus increasing overall sales and revenue for the company.

Please feel free to ask your doubts in the comments section if any.