Ikea’s business model has started to wobble

Instruction manuals from Ikea, the Swedish furniture giant, famously lack instructions. The customer is often left staring at a picture wondering which flange goes where. Now a rapidly changing retail environment has forced the company itself to consider reassembly. Ikea’s business model has long rested on the willingness of the consumer to travel to large out-of-town warehouses to buy cheap tables and bookshelves they will put together themselves. But with more people living in cities and buying furniture online, that model has started to wobble… Efforts to retool are under way. Ikea is investing in smaller stores in city centres and distribution centres for online sales… Ikea was slow to recognise the shift online. The company said it needed distribution centres in place before it ramped up online sales, and indeed delivering kitchens and bathrooms is a lot trickier than posting books, like Amazon, through a letterbox… Meanwhile, competition is intensifying. Even in India, where Ikea opened its first store this year, it is being squeezed by Bangalore-based Urban Ladder as well as a burgeoning market in furniture rental. Like most Ikea assembly jobs, then, the transformation is likely to involve furrowed brows, foul language — and a fair amount of trial and error.

Lex.

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