IKEA is one of the world’s largest privately-owned franchises recognized for their functional yet stylish home furniture and accessories.
In 2020 the brand was valued at approximately $19 billion (USD), with popularity undoubtedly stemming from product affordability. So you may be wondering, why does such a vast company sell such cheap items? Here is all you need to know!
13 Reasons Why Is IKEA So Cheap!
1. Flat Packs
IKEA’s notorious flat packs efficiently save the company from high transportation and storage costs, decreasing transit bills by $133,000 each year.
Additionally, flat packing is an excellent solution to reducing material usage, which saves $175,000 annually.
Another benefit of flat packing includes reducing damage rates during transit, meaning IKEA spends less on replacement products. The accumulation of savings made by flat packing can be passed onto the customer.
2. Self-Sufficient Customers
If you’ve ever been to IKEA, you’ll know that most of the work is down to you. From self-assembled items to self-service checkouts, IKEA slashes the cost of installation and personal customer care.
Instead, there are plenty of digital stations in-store and online to assist your shop.
Statistics indicate that the notion works well for IKEA, with 75% of customers favoring self-service outlets such as checkouts. IKEA utilizes savings to continually offer affordable goods.
3. Products Are Priced Before They Are Designed
From the get-go, IKEA aims to manufacture products at a low price. For example, the design team must create a product based on a price that has already been decided.
They’ll select appropriate materials based on cost and sustainability. Additionally, designs must be optimized to suit cheap transportation.
4. Affordable Meals At The Food Hall
Many are familiar with IKEA’s world-famous food hall, which encourages hungry shoppers to purchase irresistibly cheap meals to improve customer satisfaction and drive sales.
IKEA strives to offer food at the lowest price within a 30-mile radius, even if that means selling at a loss.
Cheap food significantly boosts sales, with shoppers spending approximately $2 billion every year; 30% of these customers visited IKEA primarily to eat!
5. Volume of Sales
IKEA’s ultimate business strategy relies on a high business volume, resulting in generous profits resulting in low-cost products.
You’ll find tactically placed IKEA stores within cities holding a population of over 500,00 where the targeted demographic, including students, rental tenants, and young families, are primarily based. To have the edge over its competitors, IKEA sells furniture for up to 50% less.
Additionally, IKEA’s advanced eCommerce platforms drive large profits where customers can access digital features such as virtual showrooms before purchasing.
6. Strong Supply Chain
IKEA consciously purchases versatile materials such as composite, acacia wood, tempered glass, PET, PE, and PP plastics to decrease costs. Suppliers favor companies such as IKEA who purchase large quantities of materials per order.
Not only does buying resourceful materials in bulk reduce waste, but it lowers company spending, beneficial to customer costs.
7. Use Of Lightweight Materials
In addition to flat packing, IKEA also uses lightweight materials to save on transportation costs. Product designs ensure that goods are light in weight by:
- Hollowing wood
- Using sustainable plastics
- Opting for hybrid materials such as composite
In recent years, IKEA has introduced innovative lightweight materials such as M-Boards that are wasted wooden fibers that create timber sheets glued together in layers.
Savings as a result of M-Board manufacturing are put onto the customer to sustain product affordability.
8. Self Assembled Furniture
IKEA preserves cheap prices by promoting a “do it yourself” ethos. Whether you purchase furniture in-store or online, you’ll receive a flat package containing furniture elements and instructions on how to assemble the item.
This may be daunting; however, IKEA’s furniture is made from as few parts as possible with ‘How To Build’ videos available on YouTube.
9. Minimalist Designs
With sustainability in mind, the majority of IKEA’s furniture is designed with simplicity. Most initial designs can be reused to create an alternative item’s blueprints saving time in production while avoiding material waste.
Meanwhile, minimalist furniture designs are in high demand, ultimately driving sales. Customers are more likely to purchase an item that they can easily envision in their home.
10. Produces Merchandise In Bulk
As we know, IKEA materials are highly versatile, meaning one material can be used for several other designs.
Due to this, their products can be manufactured in bulk. IKEA purchases higher quantities of supplies at one time to create a larger volume of furniture and reduce waste.
11. Minimal Staff Presence In-Store
At IKEA, there are plenty of digital outlets that can provide assistance meaning there is less need for employees in-store. With a more advanced eCommerce platform, there is even less need to visit a store altogether!
Each item is displayed with plenty of product information nearby, decreasing customer inquiries.
Once shopping is completed, customers can pick up and pay for their items at the self-service area. Minimizing employee payments generates savings which contribute to maintaining cheap furniture prices.
12. Renewable Items
One of IKEA’s genius ways to increase repeat customers is by offering products that allow purchasable add-on or removable features.
The VIMLE sofa, for example, can be entirely rearranged and covers wholly swapped. Exclusively at IKEA, you’ll find a variety of cover designs to help you feel as though you’re gaining a new sofa altogether!
Remember, greater profits sustain low-cost items.
Consumers are increasingly implementing sustainable habits, which influence the way they shop.
Luckily, sustainability is one of IKEA’s greatest missions meaning customers are more inclined to support environmentally friendly companies. IKEA strives to reduce waste by utilizing adaptable materials, using recycled products, and minimizing packaging.
To learn more, also see my other guides on why IKEA is so popular, the IKEA price match and price adjustment policy, funny IKEA names, and IKEA’s nine competitive advantages that make them the biggest furniture brand in the world!
IKEA strategically makes significant savings on transport, production, employee, and factory costs. Savings are put into the consistent production of low-priced goods. Meanwhile, IKEA strives to generate high profits to maintain cheap furniture by increasing repeat customers, offering affordable food, and building sustainability.