IKEA: Building a Cult Brand Founded in Sweden in 1943 by then 17-year-old Ingvar Kamprad, IKEA is the world's largest furniture retailer. The company's name is an acronym that consists of the initials from Ingvar Kamprad, Elmtaryd, the farm where he grew up, and Agunnaryd, his hometown in Smaland, south Sweden. The company, which initially sold pens, Christmas cards, and seeds from a shed on Kamprad's family farm, eventually grew into a retail giant in home furnishings and a global cultural phenomenon. Today, IKEA employs 147,000 people and owns and operates 373 stores in 47 countries. The IKEA Web site contains approximately 9,500 products. For the financial year 2015, IKEA Group's total sales amounted to $35.7 billion. IKEA inspires remarkable levels of interest and devotion from its customers. In 2014, IKEA had over 700 million visits to their stores, and more than 1.5 billion visits to their web sites. When IKEA opened their first store in Croatia, 68,000 customers visited it in its first four days. The company received 100,000 job applications for their new store in Valencia, Spain, temporarily shutting down their servers. IKEA achieved this level of success by offering a unique value proposition to consumers: leading-edge Scandinavian design at extremely low prices. The company is able to offer such low prices in part because most items come boxed and require the customer to completely assemble them at home. This strategy results in cheaper and easier transportation as well as more efficient use of store shelf space. In addition, IKEA sources its products from multiple companies all over the world rather than a handful of suppliers as many competitors do. This ensures the lowest price possible, and savings that are passed on to the consumer in the form of very low prices, although other products are also sold at higher - though still quite affordable - prices. The retailer aims to lower prices across its entire offering by an averageIKEA's vision is to create a better daily life for the many people. It has become a curator of people's lifestyles, if not their lives. At a time when consumers face a wide array of choices for everything they buy, IKEA provides a one-stop haven for coolness. It is a trusted safe zone that people can enter and immediately join like-minded people. If the Swedish retailer has its way, their customers will live in a Boklok home and sleep in a Leksvik bed under a Brunskara quilt. The beds are named after Norwegian cities and bedding after flowers and plants, for IKEA founder Kamprad, who is dyslexic, believed that it was easier to remember product names rather than codes or numbers. The Swedish retailer accounts for 5 to 10 percent of the furniture market in each country in which it operates. IKEA is far more than a furniture merchant; it sells a lifestyle that consumers around the world embrace as a signal that they've arrived, that they have good taste, and that they recognize good value for money. IKEA has succeeded in building a global cult brand. Consider, for example, the grand opening of IKEA's first store in Miami in 2014. There were hundreds of people in line, some camping out for more than 24 hours, all of them in anticipation of the opening. What motivates such fandom for a furniture store? It could be the free giveaways for the first 2,500 people, including sofas, arm chairs, gift cards, and other freebies. But for most of them it was the promise of being part of an event that spanned the course of three days. The customers got their sofas and giveaways and IKEA got another story about itself, one that was picked up in the media and drew even more shoppers. More shoppers equals more traffic, and more traffic equals more sales and more buzz. This frenzy has kept IKEA's sales growing steadily, by 5.9% in the financial year 2014 compared to 2013. IKEA maintains this performance even while it steadily cuts prices, achieving an operating margin of approximately 10 percent, which ranks among the best in the global market for home furnishing. To keep growing at that speed, IKEA has continued opening new stores around the world with up to 20 per year at a cost of $70 million per store on average. IKEA has boosted its profile in three of its fastest-growing markets: the United States, Russia, and China. In the United States, the number of stores has grown from 25 in 2005 to 42 in 2014. IKEA is also investing in emerging markets such as Croatia, Slovenia, and the Ukraine. The key success factor for these roll-outs is in preserving the strong enthusiasm IKEA evokes. What unites and enchants shoppers all over the world is the store visit, a customer experience that is common to every country IKEA operates in. IKEA provides a unique shopping experience with its blue-and-yellow buildings averaging 300,000 square feet (27,871 square meters), equal to about five football fields. The sheer number of items, fromkitchen cabinets to candlesticks, is a pivotal advantage. IKEA's stores are located a good distance from most city centers, which helps keep land costs down and taxes low. The average IKEA customer drives 50 miles roundtrip to visit an IKEA store. In order to bring IKEA even closer to its customers, the company announced that they will further extend its network of stores; for example, in Germany, one of the most important countries for IKEA, the company aims to build 20 new stores by 2025. In addition, the company also has started an online initiative that encompasses the installation of so-called pick-up-points, where customers can collect items they had previously ordered online. Wherever they are, customers tend to think of the store visit as more of an exciting and engaging excursion, which in turn is testament to the strength of the brand and the loyalty of its customers. Many stores resemble a large box with few windows and doors, and arepainted bright yellow and blue-Sweden's national colors. When a consumer walks through an IKEA store, it is a very different experience than most furniture retailers. IKEA successfully tries to keep their customers as long as possible in the stores. To begin, right at the entrance, customers can drop off their children at the playroom, a service that encourages more relaxed shopping. The floor plan is designed to follow a one-way path, so the customer experiences the entire store by proceeding along a marked path through the different showrooms. The furniture is arranged in fully accessorized displays, down to the picturepainted bright yellow and blue-Sweden's national colors. When a consumer walks through an IKEA store, it is a very different experience than most furniture retailers. IKEA successfully tries to keep their customers as long as possible in the stores. To begin, right at the entrance, customers can drop off their children at the playroom, a service that encourages more relaxed shopping. The floor plan is designed to follow a one-way path, so the customer experiences the entire store by proceeding along a marked path through the different showrooms. The furniture is arranged in fully accessorized displays, down to the picture frames on the nightstand, to inspire customers and increase spending. Along the way, the customer's attention is continuously drawn by items ranging from pencils to strategically placed bins with items like pink plastic watering cans, scented candles, and picture frames. The shopping experience constantly surprises, as IKEA replaces a third of its product line every year. Next, there's the stop at the restaurant, usually placed at the center of the store, to give shoppers a rest and encourage them to keep going until they finally reach the warehouse, where nearly all the big items are flat-packed. IKEA has created a clear positioning of what the brand stands for it is more than just value- priced, assemble-it-yourself furniture and home furnishings; IKEA offers a comprehensive lifestyle solution for its consumers. IKEA does things differently from its competitors: it determines what the price for a product should be and then challenges its designers to create a beautifully designed product that can be sold for that specified price. By doing so, IKEA fuses cost focus with a strong design culture. Due to excellent design and materials as well as good value for money, more wealthy people are also choosing to shop at IKEA. Moreover, IKEA knows their customers and customizes its offerings by selling products people want to buy. For example, the company produced a quarter of a million plastic placemats for the Chinese market to honor the year of the rooster. In just three weeks, they were sold out. And for every fan who shops at IKEA, there seems to be one working at IKEA itself. The "IKEA Spirit" calls for workers to take care of each other and inspire each other. Employees at IKEA enjoy autonomy, very little hierarchy, and a familial culture. In return, they buy into the IKEA culture of frugality and design that drives the entire company. The IKEA Group has not only successfully built a global cult brand but continues to capitalize on it, to grow, and to enable more fans to live an affordable life at home. Source: Kotler, P., Armstrong, G., Opresnik, M. O. (2017). Marketing: An Introduction (13th ed. Global ed.). Pearson Education.(30 marks) Question 3: Assuming that you are their target customer, would you purchase at IKEA? Why or why not? (40 marks)