IKEA’s Competitive Advantages (9 Different Factors)

Over the last 70 years, IKEA has rapidly grown into a multinational conglomerate that designs and sells ready to assemble home furniture and accessories worldwide.

As IKEA shows leadership over its competitors, including Walmart, Ashley Furniture Industries, and Wayfair, we take a look at the various competitive advantages that elevated IKEA.

Keep on reading to find out IKEA’s 9 most effective sources of competitive advantages!

IKEA’s Competitive Advantages In 2022 (9 Different Factors)

9 IKEA’S Competitive Advantages In 2022

1. IKEA Sells Low-Cost Products

IKEA prides itself on its ability to deliver high-quality, reliable goods at generously affordable prices.

Stores are often situated within cities populated by the targeted demographic of 16-to 34-year-olds, such as students, young families, and new homeowners, all conscious of their budget. As a result, IKEA turns a yearly profit of $11-$12 billion.

It’s no surprise that the sale of reasonably priced products has become IKEA’s leading competitive advantage. However, they are not the only company to benefit from this strategy.

Big box retailers such as Walmart profit from the sale of low price items; nevertheless, they continue to brand themself as a discount store rather than an affordable premium brand.

IKEA’s pricing strategy certainly sets it apart from its competitors. Many high-demand products such as sofas, beds, dining tables, chairs, and cabinets can be purchased for as cheap as $500!

For some perspective on price differentiation at IKEA, let’s take a look at the cost of kitchen countertops, cabinets, and installation.

Retailers such as Lowe’s and Home Depot charge $7,000-$12,000 for installation and goods, whereas IKEA’s service only costs just $5,000 with guaranteed long life.

Additionally, IKEA hosts Family Card holders’ initiatives to earn up to 15% IKEA credit when they make a kitchen purchase worth $1,000-$2,000!

2. Extensive Range Of Home Furnishing and Accessories

IKEA offers such a vast range of products that stores measured at 300,000 square feet are filled to the brim with furniture, appliances, and accessories.

At IKEA, you’ll have access to 9,500 items per store, with the launch of 2,500 new products every year. It’s no surprise customers use a map! IKEA’s production strategy is based on the following dimensions which create the Democratic Design:

  • Form
  • Function
  • Low-Price
  • Sustainability
  • Quality

Each item is crafted with modern designs that combine functionality with style meaning customers can finally wave goodbye to clunky, mismatched storage units.

Many products are produced with a minimalist appearance enabling customers to cultivate their own space or even customize their pieces.

Additionally, a large portions of IKEA’s catalog are manufactured with sustainable products to positively impact the world around us.

Numerous IKEA favorites such as the BILLY Bookcase, POÄNG Armchair, and MALM Bed are all crafted with wooden elements sourced from managed IKEA forests.

Alternatively, wood-based products such as the ODGER Chair are created with a composite consisting of polypropylene and reused wood fibers.

Several IKEA products are crafted with bamboo as it is strong, sustainable, and grows 10 times faster than wood. Equally versatile, bamboo products range from plates to storage units to vibrant kitchen fronts!

Producing a wide sustainable range caters to an increasingly eco-conscious consumer range, setting them apart from their competitors.

3. International Reach

International Reach

Founded in Sweden in 1943, IKEA has transformed into a world-famous household name.

In just 70 years, IKEA stores have opened in countries such as the U.S, Australia, U.K, Morocco, Denmark, Japan, Russia, Dominican Republic, South Korea, Canada, and many more.

In total, IKEA has established over 22 pick-up and order points in 11 countries and 28 distribution centers throughout 16 countries.

Across more than 50 countries, 420 stores have opened their doors to eager customers, with approximately 1 billion visitors each year.

70% of stores are based in Europe where Germany contributes a whopping 15% of total sales meanwhile, the U.S alone contributes 14%.

In recent years, IKEA opened 19 new stores, including India’s first location in Hyderabad. A giant milestone for the brand!

By 2025, IKEA aims to expand its reach by receiving 3 billion customers yearly and improve its international presence. Extended plans include introducing stores in the Philippines, New Zealand, Brazil, Vietnam, and more!

Every year 2.5 billion customers visit IKEA.com, meaning you don’t necessarily need to live near a store to reap the benefits. In fact, IKEA offers international shipping that reaches countries without an IKEA altogether!

4. Business Cost Efficiency

Business Cost Efficiency

IKEA strategically sells low-priced products to maintain healthy customer satisfaction, generating significant profits to be put into customer savings.

Efficiently minimizing overall business costs helps IKEA build its competitive advantages. Let’s look at a few ways the company manages costs:

Flat Packs

Renowned flat-packed ‘ready-to-assemble products are incredibly compactable and easy to transport. Each year flat packing saves IKEA $133,000 on transit bills and a further $175,000 on avoided material waste.

Predetermined Prices

Have you ever wondered how IKEA products remain so cheap? Designers plan products based on a predetermined price which ultimately influences their choice of material. Products are crafted with both sustainability and cost in mind.

Minimal In-Store Staff

At IKEA, there are plenty of handy digital tools available to customers both in-store and out, meaning the need for a minimal team of employees.

Locate self-service checkouts and pickup points in-store alongside Family Member digital screens. Furniture pieces are displayed and labeled with a helpful description, reducing customer inquiries.

5. Efficient Supply Chain

IKEA’s colossal success is primarily attributed to its worldwide network of efficient suppliers. Identified as the backbone of the company, there are 1,046 suppliers located across 50 countries.

A reliable supply chain with a low risk of product substitution solidifies the trust between brand and consumer.

The company aims to build long, stable relationships with providers by signing long contracts. However, IKEA is financially stable enough to switch from one supplier to another, meaning they usually call the shots on pricing and quantity.

Fortunately for suppliers, IKEA buys much of its versatile materials in bulk. As a dominant market leader, the risk of losing supplier business to a competitor is slim.

Introduced in 2000 was the IWAY code of conduct intended to maintain a healthy relationship between the brand and its suppliers and sub-suppliers.

Approximately 1,000 audits are completed every year to ensure no violations are committed. IKEA’s rules regulate forbidden child labor, discrimination, minimum wages, and upholding healthy solid and safety standards.

6. Strong Marketing Campaigns

6. Strong Marketing Campaigns

IKEA is the proud owner of a strong marketing strategy which is yet another significant competitive advantage factor.

Established as consumer-friendly, IKEA’s marketing campaigns aim to speak to customers on a personal level without hard-selling products.

Localization is essential to any worldwide company, adapting to various cultures, currencies, and seasonal holidays. Furthermore, IKEA hosts numerous events targeting specific types of people such as Teachers and College Students.

Using a mix of digital marketing with in-store branding, IKEA often uses witty images or catch lines to their advantage; that’s what makes them so memorable.

Major social media sites such as Twitter, Instagram, and Facebook are used to engage with a broader audience. You’ll also find IKEA on Pinterest, where idyllic rooms are showcased with tagged products to help the customer achieve the look.

IKEA’s YouTube has various videos with themes such as

  • Assembly instructions
  • Revealed tips and tricks
  • Cultural values
  • Real-life stories
  • Even video collaborations with famous faces such as Zara Larsson.

Video content effectively builds a positive relationship with consumers.

7. High Profile Collaborations

High-profile collaborations are guaranteed to create a stir amongst consumers, and IKEA has had plenty of practice!

As a leading brand, alternative companies in neighboring markets are often keen to formulate a partnership as they are a great way to enhance anyone’s competitive advantage.

So far, IKEA has collaborated with recognizable names such as Adidas and Little Sun; you can even purchase The Sims IKEA edition!

In 2020, IKEA collaborated with multi-billion dollar company LEGO to launch the BYGGLEK collection. The range incorporates fun storage solutions and an exclusive LEGO brick set. Like much of IKEA’s storage units, the boxes are sleek and subtle.

If you haven’t already, the unique IKEA app, created in collaboration with Apple, is available on the App Store and Google Play.

Enter a virtual reality version of IKEA from the comfort of your home, where you can shop for goods, check stock availability, and enjoy special deals with your Family Card.

Before purchasing, use your camera to digitally place products in your own room to see how they work with the rest of your space.

8. Positive Brand Reputation

Positive Brand Reputation

Preserving a positive, strong brand reputation is high on IKEA’s agenda, with customer satisfaction at the heart of the business.

Rapid growth and high-income figures clearly indicate brand popularity meaning this a valued source of competitive advantage.

Due to an increase in remote work, statistics predict that furniture sales are set to climb 25.5% by 2025. Therefore, it is crucial that IKEA wins over its customers.

One of the critical factors behind IKEA’s success is its drive to refine every business element to the highest standard.

Whether that be maintaining quality supply chains, producing effective marketing, or achieving the ultimate customer satisfaction. Dedication to consumer happiness has led to a more substantial reputation in the market.

From the get-go, IKEA has distinctively established itself as a low-price, high-quality brand. Countless customers have raved about IKEA products’ impressive life expectancy, with many homeowners stating their kitchen cabinets have lasted 6-7 years!

9. Differentiation

Adopting the differentiation strategy has worked in favor of IKEA’s success. The company actively looks for a competitive advantage by designing distinctively different and desirable products over its competitors.

Implementation of a low price strategy isn’t anything new; however, IKEA’s approach of designing affordable, modular, ready to assemble furniture sets the brand apart from its opponents.

Additionally, IKEA has successfully maintained a variety of loyal, long-term suppliers, placing them at a clear production advantage.

Unlike competing home furnish and accessory retailers, IKEA markets store trips as a day out for the whole family. The experience begins as soon as you step through the doors.

As IKEA is three times the size of Walmart, customers are thankful for digital maps to help navigate through the maze of products. While you’re there, treat yourself to a world-famous plate of meatballs.

Uniquely, IKEA aims to incorporate the customer’s personal way of doing things by operating a dominantly self-service system.

The experience doesn’t end once you’ve left the store; customers from around the world celebrate their self-assembled products and how they’ve customized them.

From the get-go, IKEA has distinctively established itself as a low-price, high-quality brand. Countless customers have raved about IKEA products’ impressive life expectancy, with many homeowners stating their kitchen cabinets have lasted 6-7 years!

For more insights into how IKEA operates, don’t forget to see our comprehensive list of IKEA statistics and facts.

Conclusion

From the beginning, IKEA has aimed to create an experience the customer will remember genuinely setting them apart from their competitors. Strategic marketing, business costs, and intended differentiation are driving factors that contribute to IKEA’s Competitive Advantages.

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Marques Thomas

Marques Thomas graduated with a MBA in 2011. Since then, Marques has worked in the retail and consumer service industry as a manager, advisor, and marketer. Marques is also the head writer and founder of QuerySprout.com.

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