Is IKEA really going to start selling on Amazon’s Marketplace?
IKEA, the Swedish flat-pack furniture giant, has continued to grow in recent years while other retailers have struggled. Part of its success has been due to management’s willingness to adapt to the rapid changes taking place in the market. The most recent example is IKEA’s plan to test the sales of its goods on other company’s websites beginning in 2018. By this time next year, IKEA could be selling on Amazon.com or any other number of online marketplaces around the world.
In an interview with Reuters, Inter IKEA Group CEO Torbjorn Loof would not specify what sites the retailer might sell its products, but said the need to test was necessitated by a changing “competitive landscape.”
Roughly 15 percent of the $70 billion in furniture sales in the U.S. is now transacted online, according to IBISWorld.
It will be interesting to see if IKEA will choose Amazon’s marketplace to test the sale of its products on another company’s site. The Wall Street Journal reported last month that Amazon was building “four massive warehouses” designed to handle large items such as furniture. Veenu Taneja, furniture general manager at Amazon, told the paper that the category is among the fastest growing for the e-tailer.
Mr. Loof appears confident in the company’s ability to test sales on other sites. “We have one great advantage and that is that we design, produce and distribute our own unique range,” he told Reuters.
In recent years, IKEA has added smaller pick-up and order point stores in urban areas around the world. Last year, it opened 19 of the stores, which enable customers to go online and order a product for a flat $20 fee. Customers can also place online orders at the stores for pick-up. The stores typically average about 20,000-square-feet. As an extreme point of comparison, IKEA’s largest store in the U.S. is a 456,000-square foot warehouse in Burbank, CA.
IKEA, which operates stores in 48 countries around the world, reported a sales increase of 7.1 percent last year. Comparable store sales for the year were up 4.8 percent.
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DISCUSSION QUESTIONS: Why do you think IKEA is planning to test the sale of its products on other sites? What do you see as the pros and cons of such a move?