Australia has been keen on welcoming the big-box retailers lately, and IKEA is the latest entry, with the company opening its second Melbourne location in the suburb of Springvale this morning.
The store, which had been rumoured for quite some time before the business confirmed the location last year, is the city’s second location along with the existing store in Richmond, and is about 50% bigger.
Those shoppers who head down will end up walking about two kilometres if they travel through the entire store – a testament to the unique way in which Ikea lays out its products.
The launch not only highlights the growing attraction of big box retailers such as Costco and hardware chain Master’s, but also how thrifty consumers are becoming. Cheap, DIY alternatives such as those provided by Ikea are set to experience a steady rise in spending over the next few years, experts have predicted.
Here are 10 lessons for SMEs on how Ikea runs its business.
One of the most iconic aspects of an Ikea store is the layout of each product, set out along a path designed by the store. Every location even has a map showing customers how they should make their way to the end, almost like a maze. In some locations these can be hundreds of metres long.
The purpose of this is simple – it ensures every customer walks through every single product range. Although they can skip between areas if they choose, the layout of each floor makes it much simpler to just walk the path provided for them, and see every product in the process.
There’s little wonder why Ikea sets up all of its product display as though you’re walking into someone’s house – they want you to feel at home.
As customers walk through the designated path provided, they see various bedrooms, kitchens and bathrooms decked out with all different sorts of products. Literally everything is for sale.
Not only does this make customers feel more comfortable after having driven quite a while to get there, but it also allows them to imagine how they would incorporate those products into their own home.
Customers can walk, look, touch and feel each product, and the open space of each room means they aren’t navigating tiny aisles or feel like they are bothering anyone by taking up too much time. They feel free to browse at their own leisure, which will make them much more likely to buy something.
Part of the whole “Ikea experience” is stopping off at the restaurant halfway between the display rooms and the warehouse. This encourages people who aren’t buying products to at least get some food, and also helps associate the Ikea brand with an experience, rather than just another retail outlet.
Consistency and branding can be underrated. Many customers enjoy coming to a store and knowing that no matter where they go, it will all be set up the same way.
Each Ikea store not only shares the same planning method, with show rooms leading on to warehouses, but they also have the same product range. Customers can look up products in the United States and know they’ll likely be able to find the same ones in Australia or Europe.
There are all sorts of reasons people like Ikea furniture, but by far the biggest is because it’s so cheap. Customers can get a full dining table set, couch or bed for next to nothing compared to some dedicated furniture retailers.
Discounting doesn’t have to ruin a business – it just needs to be done in the right way. IKEA cuts corners by having customers retrieve all the furniture from a warehouse at the end of their browsing journey, and most of all, by having them construct it themselves.
Plenty of costs are cut in packing as well – Ikea keeps it simple and lean. This also has the added benefit of being environmentally friendly.
Staffing is kept to a minimum as well. You’ll notice that Ikea staff aren’t actively helping customers, instead they are opening boxes, arranging furniture. They will assist when asked, but for the most part just stay out of everyone’s way.
Cutting corners doesn’t always work, but it can when you’re completely honest about it. Ikea has signs all around its warehouses, listing questions like, “Why do I have to build my own furniture?”, and “Why doesn’t Ikea deliver?”
Customers are less likely to be outraged about such cost cutting methods because Ikea is up-front about it. The company literally says, “If you make this yourself, it will be cheaper”.
Too many businesses try and hide their cost cutting. Ikea lays it right out in the open.
Walking through the Ikea showroom is a great example of how to set up shop, but it’s also a great example of opportunistic retailing. While most of the products are bulky, such as tables, beds and bookcases, you’ll also find smaller products littered throughout the displays.
This is an example of Ikea catering to two markets – those that are coming to buy a big piece of furniture, and those that are just coming to browse. No matter who you are, Ikea doesn’t want you walking away with nothing.
While you might not buy the $5,000 kitchen set, you may instead buy the nicely-designed crockery for $30. Instead of buying a new chest of drawers, you might instead be drawn to the $20 decorative lanterns.
Just because your products are cheap doesn’t have to mean they’re ugly. Ikea puts a great deal of care into the design of its products and ensures they are shown in the best possible way – why do you think the lights are so bright inside?
Even if retailers don’t have a say over the final presentation of the products they are selling, they can still present them to show off their best features. People like good-looking products – a lower cost will be an added benefit.
Another added benefit of this is that Ikea products have now become iconic, and customers will be able to recognise the design of certain pieces of furniture wherever they go. It’s become so iconic that many furniture makers have tried to emulate Ikea’s design practices.
There aren’t many cities with more than one or two Ikea outlets. The lower number of stores not only decreases costs but also means consumers are forced to go out and make their way to a store that could be up to half an hour or an hour away. The lower amount of stores enhances the perception of value associated with the brand.
This also has the added benefit of making you feel like you need to buy something. After all, you don’t want to have come all this way and go back empty handed, do you?
There’s a reason why Ikea arms its shoppers with bags, catalogues and measuring tapes before they even enter the store – they want them to do something. You don’t want bored, passive shoppers. You want active, happy shoppers who are having fun interacting with your products.
This is also bolstered by the fact you don’t even pick anything up until the very end of the Ikea journey. Shoppers are free to walk around empty handed, content knowing they’ve found what they’ve wanted and can pick it up at their leisure.
Keeping the shopping invisible also means they’ll be more likely to buy.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
