IKEA’s Challenges In Developing A Multi-Channel Sales Strategy And Competing In The Online Sales Market

IKEA’s decision to enter the online sales market

IKEA has recently decided to enter the online sales channel along with their physical stores. This is because the customers are not happy anymore to drive out to their out of the town stores for buying flat pack furniture. This is why it has been experiencing a drop in their sales. As a counter strategy to this business issue, IKEA planned to develop itself into a multi channel sales brand where the customers go to buy their products online as well as in the city centres and the big box stores. As informed by Arestav and Åström (2018), the company has planned to launch a new E-Commerce application for this purpose which will be incorporating elements like place, augmented reality function and 3D visualisation of furniture in various home settings. However, in the context of online marketing and sales IKEA will be facing significant competition from Amazon and other popular online retail market chains. Like IKEA has developed market in Asia Pacific, Europe and North American market, Amazon has strong retail presence in the online sector of all these places including other Geographic locations like China, India, and other potential Asian and European markets as well. The branding and positioning of Amazon is much stronger than IKEA. Hence this can be considered to be a serious market threat for the furniture manufacturing and selling organisation. In fact, Lin et al. (2017), states that Amazon has their two personal furniture brands, who will give serious competition to the IKEA, in the major business locations, where they want to open their ecommerce channels. Again, in addition to Amazon, Fredman and Nilsson (2015), informs that IKEA will also be facing competition from Flipkart, the emerging ecommerce brand from India as well as Otto from Germany. 

Evolving with the changing needs of the customers, IKEA could not cope up with the marketing trends in spite of having highly distinguished as well as trends product lines. The furniture of IKEA are supposed to be most scientifically designed and most comfortable. Their material is also of the finest quality and that is why the furniture of the company is highly in demand among the users. However, the sales channels of the company are not competent enough. The customers are not willing any more to drive down to the out of town box stores of IKEA in order to purchase furniture. It needs mention that IKEA mostly do not support in home installation other than the complex fitting furniture (Albinsaad 2016). However, the customers have to travel to the stores of the company in order to select the product that they are willing to buy. ON the contrary, the rise of ecommerce began to pose serious threats before the company, where the major market players in the ecommerce domain like Amazon, Harvey Norman, Otto, Flipkart, PepperFry and others are also developing furniture brands of their own. The main area of concern for IKEA was that the company did not have online sales channels that could facilitate their customers with the benefit of selecting the latest designs of IKEA sitting at the convenience of their homes. Between the financial year 2015-16 and 2016-17 the company recorded an annual sales profit of 3.1 billion Euros and the sales of IKEA for the same markets in the financial year 2017-18 have been 20% lesser, statistics shows that market that IKEA has lost, have been drastically consumed by the online market giants (Niu et al. 2018). In this context, Larisa and Tîbîrn? (2017) have opined that it is very easy for the company to open a portal for online sales in various countries. However, the main lag that would come up as a challenge for the company is the lack of their digital service technology and spaces like ecommerce hubs and warehouses.

Challenges faced by IKEA in the online market and competition from Amazon and other e-commerce giants

Meegahapola and Perera (2017), identified that in order to come up with a infrastructure as wide and encompassing as Amazon in America and Europe, a minimum of 6 years will be required at the least. In order to highlight the intensity of the situation, it should be specif3oef that IKEA have already come up with an alternative online sales channel, which are sales through their personal website. In the year 2018, the company also came up with their own mobile application for flourishing their ecommerce platform. Initially the online service of the company was concentrated up to provision of 3D catalogue only (de Regt and Barnes 2019). After that in the year 2019 the company came up with their augmented reality application that allows the users the chance of place the 3D image of their furniture from the application anywhere in their room and they could also zoom in or zoom out the images over the mobile application only. This application helped to lift the market value of the company, initially. 

As discussed by Joshi et al. (2017), after the discovery of the new application of IKEA, the regular basis customers of the company were excited over the fact that they could shop their furniture from their homes. However, the results of introducing a new application did not go as the company would have expected it to be. Nevertheless, the customers of IKEA were not accustomed with online shopping. However, when they started to explore the app of IKEA, They grew interest over the other ecommerce sites also. As an outcome, they started to explore and buy the products of other ecommerce brands also and this brought about market segmentation. Hence, the recent trends show that the sales of IKEA have dropped by 0.2% already compared to that in the previous quarter of the last year (O’Byrne 2018).

Advantages of the launch of augmented reality app

• The greatest advantage is that the customers were easily and quite rapidly made aware of the brand presence in the ecommerce sector
• The company could understand the customer preferences in depth as they selected the filters over the app while searching customers
• The facility of getting their products customised as per their will helped to enhance customer loyalty. 

Disadvantages

• There are only 100 styles of products that the customers can visualise with augmented reality.
• The acquaintance of the customer segment of IKEA with ecommerce platforms also exposed the competitor online brands like Amazon, Otto, eBay and other before them.
• This brought about segmentation of the customer base of IKEA which comprised of women aged between 25 to 44 years.
• The smaller bandwidth of the application makes it crash frequently    

IKEA have faced competition from the big online brands only. In terms of product preference, they lay ahead of most of the big local brands of their most poised markets. Hence, in order to come in the same line of competition, the organisations have to create a strong brand presence. They have to develop an online strategy that would allow the customers to assemble their products over the virtual projection. This will create value for their customers as this innovative service quality is not offered by any other market competitors. The brand loyalty of the customers will also be ensured as an impact of implementing this strategy.

The second recommended strategy is to invest in content marketing. They need to incorporate visual content marketing over Facebook, YouTube, and SnapChat and other similar online channels that promote visual content. This will enable the customers to know about their market innovations. Lastly, it is recommendable that IKEA have to focus on creating an experience and not simply a product for the customers. IKEA can create customers experience by offering heavy discounts and most innovative products designs over their online platforms that will not be available over any other ecommerce channels. This will help to achieve high word of mouth publicity. Hereby, it can be conclude in the end that IKEA represents an impressive case where a global company can leverage e-commerce to boost sales and customer interaction. 

Reference List

Albinsaad, H., 2016. How e-commerce affects the trading system. Int J Sci Technol Res, 5.

Arestav, A. and Åström, S., 2018. Bridging the digital and physical worlds: The deployment of augmented reality in a retail setting–a case study on IKEA.

de Regt, A. and Barnes, S.J., 2019. V-Commerce in Retail: Nature and Potential Impact. In Augmented Reality and Virtual Reality (pp. 17-25). Springer, Cham.

Fredman, M. and Nilsson, S., 2015. The preferred Complex Purchase Process in-store–A case study on IKEA.

Joshi, H., Agarwal, V., Ghodke, A., Gupta, D. and Gaikwad, S., 2017. Proposal of chat based automated system for online shopping. American Journal of Neural Networks and Applications, 3(1), pp.1-4.

Larisa, D.G. and Tîbîrn?, L., 2017. E-commerce: concepts, perspectives and challenges (No. y: 2017: i: 5: p: 33-42, pp. 1-52). Center for Studies in European Integration (CSEI), Academy of Economic Studies of Moldova (ASEM).

Lin, P., Kong, X., Li, M., Chen, J. and Huang, G.Q., 2017, August. IoT-enabled manufacturing synchronization for ecommerce. In 2017 13th IEEE Conference on Automation Science and Engineering (CASE) (pp. 401-405). IEEE.

Meegahapola, L. and Perera, I., 2017, September. Enhanced in-store shopping experience through smart phone based mixed reality application. In 2017 Seventeenth International Conference on Advances in ICT for Emerging Regions (ICTer) (pp. 1-8). IEEE.

Niu, B., Liu, Y., Liu, F. and Lee, C.K., 2018. Transfer pricing and channel structure of a multinational firm under overseas retail disruption risk. International Journal of Production Research, pp.1-25.

O’Byrne, R., 2018. Selling online. MHD Supply Chain Solutions, 48(5), p.18.