Ikea Business Model: Repositioning the Point of Production

The unique Ikea business model IKEA revolutionized the way people furnish their homes by offering affordable, stylish, and functional products. , The Swedish furniture giant has IKEA has become a global icon, captivating customers with its unique shopping experience and dedication to sustainability. By delving into the intricacies of IKEA’s business model, we uncover the

Gary Fox

Ikea Business Model Canvas

Ikea Business Model: Repositioning the Point of Production

The unique Ikea business model IKEA revolutionized the way people furnish their homes by offering affordable, stylish, and functional products. , The Swedish furniture giant has IKEA has become a global icon, captivating customers with its unique shopping experience and dedication to sustainability. By delving into the intricacies of IKEA’s business model, we uncover the strategies and philosophies that have propelled this company to the forefront of the furniture industry, making it a household name around the world.

How Does IKEA’s Business Work

IKEA operates as a multinational furniture retailer, offering a wide range of well-designed, functional, and affordable home furnishing products. The company’s business model is based on a concept of self-service and flat-packing, which allows customers to browse, select, and transport their purchases themselves. IKEA designs its own products, works with suppliers to manufacture them, and then sells these items through its large, warehouse-style stores and online platforms. By controlling the entire value chain, from design to retail, IKEA can keep costs low and pass the savings on to its customers.

Key Facts About Ikea

. Company name:

Ikea

Founders:

Ingvar Kamprad

Launch date:

1943

Year founded:

1943

Company CEO:

Jesper Brodin

Headquarters

Leiden, Netherlands

Number of employees

219,000 (2023)

Ticker symbol

IKEA is privately held

Annual revenue

47 billion euros (2023)

Profit | Net Income

1.507 billion euros (2023)

Market Cap

IKEA is privately held

What does IKEA stand for?

An idea turned into a name! IKEA is named after the initials of founder Ingvar Kamprad, Elmtaryd, the farm on which he grew up, and the nearby village Agunnaryd.

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A brief history

IKEA was founded in 1943 by Ingvar Kamprad, a 17-year-old Swedish entrepreneur. Initially, the company sold a variety of products, including pens, wallets, and picture frames, through mail-order catalogs. In 1948, furniture was introduced into the product line, and it quickly became the company’s primary focus. IKEA’s innovative flat-pack design, introduced in the 1950s, revolutionized the furniture industry by making transportation and storage more efficient.

Key milestones in IKEA’s history include:

  • 1943: Ingvar Kamprad founds IKEA as a mail-order business.
  • 1948: Furniture is added to IKEA’s product line.
  • 1953: The first IKEA showroom opens in Älmhult, Sweden.
  • 1956: The flat-pack design is introduced, allowing customers to assemble furniture themselves.
  • 1958: The first IKEA store opens in Älmhult, Sweden.
  • 1960s-1970s: IKEA expands internationally, opening stores in Norway, Denmark, Switzerland, and Germany.
  • 1985: IKEA begins sourcing from suppliers in Poland, marking the start of its global sourcing strategy.
  • 2000: The company launches its online store, expanding its reach beyond physical locations.
  • 2012: IKEA introduces its People & Planet Positive strategy, focusing on sustainability and social responsibility.
  • 2021: IKEA announces its commitment to becoming climate positive by 2030.

Throughout its history, IKEA has remained committed to its core values of affordability, sustainability, and democratic design, continually innovating to meet the evolving needs of its customers.

Who owns IKEA?

IKEA is owned by a complex structure of companies and foundations. The ultimate parent company of the IKEA Group is Inter IKEA Holding B.V., a Dutch company that is owned by the Interogo Foundation, a Liechtenstein-based foundation. The Interogo Foundation is controlled by the Kamprad family, ensuring that IKEA remains true to its founding principles and long-term vision. This unique ownership structure allows IKEA to maintain its focus on sustainability, affordability, and growth while minimizing external influences and maintaining a high level of control over its operations. IKEA is not publicly traded on any stock exchange, and its financial information is not widely disclosed to the public.

Mission statement

“Our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.”

How IKEA works

The IKEA business model is built around the concept of offering affordable, well-designed, and functional home furnishing products to the masses. The company achieves this by controlling the entire value chain, from product design and sourcing to manufacturing and retail. IKEA’s in-house designers create products that are stylish, functional, and easy to produce, while the company works closely with suppliers to ensure cost-efficiency and adherence to strict quality and sustainability standards.

One of the key aspects of the IKEA business model is its self-service and flat-packing approach. Customers browse through the store, select their products, and then collect the flat-packed items from the warehouse section. This not only allows IKEA to save on labor costs but also enables customers to transport their purchases easily. By involving customers in the process, IKEA can offer lower prices while still maintaining a satisfying shopping experience.

IKEA’s stores are strategically located and designed to maximize customer engagement and sales. The stores feature a showroom area where products are displayed in realistic room settings, inspiring customers and showcasing the versatility of IKEA’s products. Customers are guided through a predetermined path that exposes them to the entire product range, encouraging impulse purchases. The stores also include restaurants and childcare facilities, making the shopping experience more convenient and enjoyable for families.

In recent years, IKEA has also focused on expanding its online presence, allowing customers to browse and purchase products through its website and mobile app. The company has invested in digital technologies to enhance the customer experience, such as augmented reality tools that enable customers to visualize how furniture would look in their homes. By embracing digital channels, IKEA can reach a wider audience and complement its brick-and-mortar operations.

The Revenue Model of IKEA

The IKEA business model makes money through several key revenue streams:

  • Product sales: The primary source of revenue for IKEA comes from the sale of its home furnishing products, including furniture, accessories, and home décor items.
  • Food and beverage sales: IKEA’s in-store restaurants and food markets contribute to the company’s revenue by offering affordable meals and Swedish specialties.
  • Service sales: IKEA generates revenue through services such as home delivery, assembly, and installation, which are offered to customers for an additional fee.
  • Franchise fees: IKEA operates some of its stores through franchisees, who pay a franchise fee to the company for the right to use its brand and business model.

What is unique about ikea business model?

IKEA operates in the home furnishings and furniture retail industry, targeting the mass market with affordable, well-designed products. The company differentiates itself from competitors through its unique business model, which combines self-service, flat-packing, and cost-efficient sourcing. IKEA’s competitive advantages include its strong brand recognition, global presence, economies of scale, and commitment to sustainability and social responsibility. By offering a wide range of products that cater to various tastes and needs, IKEA has established itself as a one-stop-shop for home furnishing solutions.

Key Features of IKEA’s Business model

  • Self-service and flat-packing approach to reduce costs
  • In-house product design and global sourcing for cost-efficiency
  • Large, warehouse-style stores with showrooms for customer engagement
  • Commitment to sustainability and social responsibility – see the Ikea Circular Economy

The Ikea Business Model

Ikea Business Model Canvas

What is the business model of ikea furniture company? The business model of Ikea is a mix of retail, ecommerce and self-service business model patterns. Read on to find out more.

Customer Segments Of The Business Model Canvas

Customer Segments

The IKEA business model caters to a wide range of customer segments. The company’s affordable, stylish, and functional products appeal to various demographics, making IKEA a popular choice for many. IKEA’s customer segments include:

  • Young adults: Students and first-time homeowners on a budget
  • Families: Households looking for practical and affordable furnishings
  • Homeowners: Those seeking to upgrade or redecorate their living spaces
  • Renters: Individuals in need of temporary or flexible furnishing solutions
  • DIY enthusiasts: Customers who enjoy the process of assembling furniture
  • Value Proposition Of The Business Model Canvas

    Value Propositions

    The IKEA business model offers a compelling value proposition to its customers. The company’s unique blend of affordability, design, and functionality sets it apart from competitors and attracts a loyal customer base. IKEA’s main value propositions include:

  • Affordable prices: High-quality products at low costs
  • Functional design: Practical and space-saving solutions for everyday living
  • Wide product range: Extensive selection of furnishings for every room
  • Shopping experience: Unique, immersive, and inspiring store layout
  • Sustainability: Commitment to eco-friendly materials and practices
  • Channels

    Channels

    The IKEA business model utilizes various channels to reach and serve its customers. The company’s omnichannel approach ensures that customers can engage with the brand through multiple touchpoints. IKEA’s main channels include:

  • Physical stores: Large, warehouse-style outlets with showrooms and marketplaces
  • Online store: E-commerce platform for browsing and purchasing products
  • Mobile app: Convenient access to product information and shopping features
  • Catalog: Annual publication showcasing products and inspirational content
  • Social media: Engaging customers through popular platforms like Instagram and Facebook
  • Key Relationships Of The Business Model Canvas

    Customer Relationships

    IKEA’s business model emphasizes building strong, long-lasting relationships with its customers. The company focuses on creating a positive and memorable shopping experience that encourages customer loyalty and advocacy. IKEA’s customer relationships are characterized by:

  • Self-service: Empowering customers to explore, select, and transport products independently
  • Co-creation: Involving customers in the assembly and customization of products
  • Customer support: Providing assistance through various channels, including in-store, phone, and online
  • Loyalty programs: Rewarding frequent shoppers with exclusive benefits and discounts
  • Community building: Fostering a sense of belonging among IKEA fans through events and online engagement
  • Key Activities Of The Business Model Canvas

    Key Activities

    IKEA’s business model revolves around a set of key activities that drive its value creation and delivery. These activities ensure that the company consistently meets customer needs and maintains its competitive edge. IKEA’s key activities include:

  • Product design and development: Creating innovative, functional, and affordable products
  • Supply chain management: Coordinating the efficient flow of goods from suppliers to stores
  • Retail operations: Managing the day-to-day operations of IKEA’s physical and online stores
  • Marketing and advertising: Promoting the IKEA brand and driving customer engagement
  • Sustainability initiatives: Implementing eco-friendly practices and supporting social responsibility projects
  • Key Resources Of The Business Model Canvas

    Key Resources

    The IKEA business model relies on a set of key resources to create and deliver value to its customers. These resources form the foundation of the company’s competitive advantage and enable its global operations. IKEA’s key resources include:

  • Brand reputation: Strong, globally recognized brand associated with affordability and quality
  • Intellectual property: Unique product designs, trademarks, and patents
  • Human capital: Skilled and dedicated workforce across various functions
  • Physical assets: Extensive network of stores, warehouses, and distribution centers
  • Supply chain: Efficient and cost-effective global sourcing and logistics network
  • Key Partners Of The Business Model Canvas

    Key Partners

    The IKEA’ business model involves collaboration with a network of key partners. These partnerships enable the company to optimize its operations, access specialized expertise, and enhance its value proposition. IKEA’s key partners include:

  • Suppliers: Manufacturers and raw material providers that meet IKEA’s quality and sustainability standards
  • Franchisees: Independent operators who manage IKEA stores in certain markets
  • Logistics providers: Companies that facilitate the transportation and distribution of IKEA products
  • Technology partners: Firms that support IKEA’s digital initiatives and e-commerce operations
  • Sustainability partners: Organizations that collaborate with IKEA on environmental and social responsibility projects
  • Financial institutions: Banks and investors that provide funding and financial services to support IKEA’s growth
  • Revenue Streams Of The Business Model Canvas

    Revenue Streams

    The IKEA business model generates revenue through several key streams. The company’s diversified income sources contribute to its financial stability and growth. IKEA’s main revenue streams include:

  • Product sales: Revenue generated from the sale of furniture and home furnishings
  • Food and beverage sales: Income from in-store restaurants and food markets
  • Service sales: Revenue from services such as delivery, assembly, and installation
  • Franchise fees: Fees collected from franchisees for the use of IKEA’s brand and business model
  • Rental income: Revenue generated from the rental of IKEA-owned properties
  • Cost Structure Of The Business Model Canvas

    Cost Structure

    IKEA’s business model incurs various costs to maintain its operations and deliver value to customers. The company must manage these costs effectively to ensure profitability and long-term sustainability. IKEA’s main cost components include:

  • Cost of goods sold: Expenses related to the production and procurement of products
  • Logistics and distribution: Costs associated with transporting and storing products
  • Retail operations: Expenses for running physical stores and online platforms
  • Marketing and advertising: Costs related to promoting the IKEA brand and products
  • Employee salaries and benefits: Compensation for IKEA’s global workforce
  • The future of the IKEA Business Model

    As IKEA looks to the future, the company will continue to invest in digital technologies, such as augmented reality and artificial intelligence, to enhance the customer experience and streamline operations. This will enable IKEA to offer more personalized product recommendations, improve its e-commerce capabilities, and optimize its supply chain.

    Sustainability will remain a key focus for IKEA, with the company setting ambitious goals to become climate positive and fully circular by 2030. This will involve increasing the use of renewable energy, developing more eco-friendly products, and implementing closed-loop manufacturing processes. By prioritizing sustainability, IKEA can not only reduce its environmental impact but also appeal to increasingly environmentally conscious consumers.

    IKEA will also likely expand its offering of services, such as home delivery, assembly, and furniture rental, to cater to the growing demand for convenience and flexibility. As urbanization continues and living spaces become smaller, IKEA may focus on developing more space-saving and multifunctional furniture solutions.

    Additionally, IKEA may explore new partnerships and collaborations to enter new markets, diversify its product range, and tap into emerging trends. For example, the company could collaborate with technology firms to develop smart home solutions or partner with fashion brands to create limited-edition collections.

    Adapting the IKEA business model to the evolving needs of its customers and the broader societal and environmental challenges, IKEA can maintain its position as a global leader in the home furnishings industry while continuing to create value for all its stakeholders.

    Business Model Patterns

    The are some business model patterns related to the IKEA business model.

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