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Posts Tagged ‘Ikea’

IKEA has big growth plans. According to the Wall Street Journal, it aims to increase its revenue by €50 billion by 2020 — 74% higher than its 2014 revenue (IKEA Can’t Stop Obsessing About Its Packaging, Jun 17). Part of that growth is going to come from expanding into new markets, some may come from new formats, but a lot of it has to come from selling more stuff through existing stores. And that is going to require finding ways to cut prices to move more volume.

That’s where design comes in. IKEA is reviewing products in order to find ways to reduce their production and — importantly — their distribution costs. As this graphic demonstrates, this is pretty much a war on air.

BT-AC519A_IKEA_16U_20150616174511

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Another day, another post on Norsemen selling furniture for college kids and divorced men. The question this time is about how IKEA designs products, which the Wall Street Journal describes as an excruciating, arduous process (The Long, Slow Process of IKEA Design, Oct 14).

It takes car companies about three years to design a sedan, and handset makers can churn out a new smartphone in six months. But an IKEA kitchen takes half a decade to create. …

“It’s five years of work into finding ways to engineer cost out of the system, to improve the functionality,” Mr. Agnefjäll said of the company’s “Metod” kitchen, a new model, during an interview at a store in his hometown of Malmo, located on Sweden’s southwest coast.

The Metod kitchen (translated as “Method” in English), is the brainchild of a clutch of designers sitting near IKEA’s headquarters here. The goal is to achieve “democratic design,” products that will work in homes whether they are located in Beijing, Madrid or Topeka.

IKEA—known for minimalist design—packs enormous complexity into a kitchen. Metod consists of 1,100 different components, and distilling them all into a cheap, green and easily shippable package has proved arduous.

As the Swedes tell it, they go through a lot of steps to get the design just right.

So is the Journal right to label IKEA as slow and plodding? (more…)

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Most of us think of IKEA as “just some oak and some pine and a handful of Norsemen selling furniture for college kids and divorced men” but they also move a boat load of food. The Wall Street Journal reports that with food sales of around $2 billion per year, they are around the same size as Panera and Arby’s (IKEA’s Path to Selling 150 Million Meatballs, Oct 17). Just why and how did IKEA get into the meatball business? Check it out.

And here’s the reporter with a little more information explaining how IKEA has grown its food business.

[audio http://podcast.mktw.net/wsj/audio/20131017/pod-wsjwnhansegardikea/pod-wsjwnhansegardikea.mp3]

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A Slate article asks a very simple question: “Ikea is so good at so many things. Why is it so bad at delivery?”

The author tells the story of an item that was purchased from Ikea and was supposed to be delivered by a third party. While Ikea claimed to ship the item, the third party claimed to never receive it. Since Ikea claimed the item was shipped, the order could not be cancelled without incurring a hefty cost. Apparently, this is not a unique experience:

The nightmare of Ikea delivery is a truth so universally acknowledged that even the company cops to it. Chief marketing officer Leontyne Green talked about her own “very frustrating” Ikea delivery experience in a December 2011 Ad Age profile, which stressed the firm’s ongoing efforts to improve delivery and overall customer service.

In trying to explain the above conundrum, the author recruits several of our colleagues from Dartmouth and Harvard:

“With sporadic orders over a wide geographic area, Ikea would need a fleet of trucks that might be idle one day and not able to handle the load the next,” says Robert Shumsky, a professor of operations management at the Tuck School of Business at Dartmouth.

We have discussed several times, albeit in the context of grocery delivery, the fact that one of the main cost drivers of delivery services is density. Since Ikea tends to be quite far from urban and dense areas, it is usually difficult to build density and thus difficult to offer a cost efficient services.  One may charge a high price for such a service, but given their target market, this may not be ideal. (more…)

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