Customer Strategy: The Case of Ikea
Last week, Ikea opened its smallest store in Australia. Only 98sqm, nestled between the trees of the brightly lit Warringah Mall in the Northern Beaches, it’s a far cry from the experience of the ‘Weekend Trek’ to the superstore with which Australian customers have a love-hate relationship. I visited the Brookvale store over the weekend to get a first-hand look at how this small brick and mortar store might revolutionise the face to face retail industry.
After years of success from the large format superstore, why would Ikea suddenly change one of the core components of its whole business model?
The Answer: Customer behaviour
Australian consumers are obsessed with renovating. The renovation market is booming with the final quarter of 2018 proving the best for the renovation Industry in Australian history. We’re also a nation that lives for the pursuit of leisure time. To us, convenience and accessibility are key to gaining our share of wallet. Finally, Ikea identified a high-value customer segment, those that were looking for a package solution in the kitchen and bedroom range rather than individual pieces. Customers can attend two hour, one-on-one consultations where an IKEA co-worker walks through every aspect of the kitchen and bedroom planning process.
Identifying these customer needs, Ikea has used customer strategy to roll out a new solution to meet them. Planning stores that leverage digital experiences in accessible locations to provide extra focus to the high-value customer set. It’s leveraging the current assets in its business model (warehouses), but building new channels in which a customer can have an experience that better meets their needs.
Ikea’s execution of customer strategy is clever
There’s something so clever about this approach that many organisations fail to do because they get caught up in the hype of their ideas. Rather than investing significantly into this approach, they’ve built a pop-up store. It’s an experiment.
The initial store is a four-month trial of the new model. Ikea’s customer strategy has led to a new and innovative, nested business model for the organisation. But it’s still in the “explore” phase where the model is being tested and risk and uncertainty remain high.
Completing a four-month experiment will provide vast customer insights. Ikea can continuously review and refine the experience based on feedback, and potentially even perish the idea without significant investment into several stores across the country.
The small format store is more than a “planning store”, it’s a living customer test lab.
I’m personally looking forward to the outcomes of the experiment.
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Senior Associate, The Strategy Group
Michelle is passionate about using digital technologies to improve business processes and engender collaboration in the workplace.
Through her experience on technology programs, Michelle has become an advocate for resolving complex business problems by using innovation techniques and strategies. Michelle previously worked at a global technology consulting firm in management consulting and project management, primarily working on large scale technology implementation programs for Australian tier one and two banking, insurance and superannuation organisations.
Michelle hosts a podcast about startups in which she interviews Australian entrepreneurs, and runs a candle-making business. Michelle holds a Bachelor of Commerce Liberal Studies from the University of Sydney.
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