IKEA Business Model

IKEA’s business model centers around offering affordable and functional furniture to a wide range of customers. With a comprehensive product range, DIY assembly, and efficient operational processes, IKEA provides value to homeowners, renters, students, and professionals. Value-based pricing generates revenue from product sales, restaurant sales, and e-commerce. Key activities include design, supply chain management, and marketing. IKEA’s key resources include a global store network, supply chain infrastructure, and design centers. Strategic partnerships and cost-efficient operations contribute to IKEA’s success.

Value Proposition:

  1. Affordable and Functional Furniture: Providing affordable and functional furniture solutions for customers.
  2. Wide Product Range: Offering a wide range of furniture products to cater to different customer needs.
  3. Do-It-Yourself (DIY) Assembly: Enabling customers to assemble their furniture, reducing costs and providing a sense of accomplishment.

Operational Model:

  1. Flat-Pack Furniture: Designing furniture that can be efficiently packaged in flat packs, reducing transportation costs.
  2. Self-Service Shopping: Encouraging customers to navigate and collect products themselves, reducing labor costs.
  3. Large Warehouses: Operating large warehouses to store and distribute furniture products.

Pricing Model:

  1. Value-Based Pricing: Setting prices based on the value perceived by customers, considering factors such as design, quality, and functionality.

Revenue Model:

  1. Product Sales: Generating revenue through sales of furniture and home furnishing products.
  2. Restaurant Sales: Generating revenue through sales of food and beverages in IKEA’s restaurants.
  3. E-commerce Sales: Generating revenue through online sales via IKEA’s e-commerce platform.

Customer Segments:

  1. Homeowners and Renters: Targeting individuals who own or rent homes and require furniture and home furnishing solutions.
  2. Students and Young Professionals: Catering to the needs of students and young professionals who seek affordable and functional furniture.
  3. Interior Designers and Decorators: Targeting professionals involved in interior design and decoration projects.

Key Activities:

  1. Product Design and Development: Designing and developing furniture products with a focus on affordability, functionality, and aesthetics.
  2. Supply Chain Management: Managing the supply chain to ensure efficient sourcing, production, and distribution of furniture products.
  3. Marketing and Advertising: Promoting IKEA’s brand and products through marketing and advertising campaigns.

Key Resources:

  1. Global Store Network: Physical store locations worldwide to showcase and sell IKEA’s furniture products.
  2. Supply Chain Infrastructure: Efficient supply chain infrastructure to ensure timely sourcing and distribution of furniture products.
  3. Design and Innovation Centers: Centers dedicated to product design, development, and innovation.

Key Partnerships:

  1. Supplier Partnerships: Collaborating with suppliers to ensure a reliable and cost-effective supply of materials and components for furniture production.
  2. Design Partnerships: Partnering with designers and design firms to create innovative and appealing furniture products.
  3. Delivery and Logistics Partnerships: Partnering with delivery and logistics companies to streamline product distribution and improve customer experience.

Cost Structure:

  1. Production and Manufacturing Costs: Costs associated with furniture production, including materials, labor, and manufacturing processes.
  2. Store Operations Costs: Expenses related to operating physical stores, including rent, utilities, and staff salaries.
  3. Marketing and Advertising Costs: Costs associated with marketing campaigns, advertising, and brand promotion.

Key Highlights

  • Business Model:
    • Affordable and functional furniture for diverse customers.
    • Comprehensive range, DIY assembly, efficient operations.
    • Revenue from sales, restaurants, and e-commerce.
    • Design, supply chain, and marketing activities.
    • Reliance on partnerships and cost-efficiency.
  • Value Proposition:
    • Affordable, functional furniture solutions.
    • Wide range catering to various needs.
    • DIY assembly reduces costs, provides satisfaction.
  • Operational Model:
    • Flat-pack design for cost-effective transportation.
    • Self-service shopping, lower labor costs.
    • Large warehouses for efficient distribution.
  • Pricing Model:
  • Revenue Model:
    • Product sales, restaurant sales, e-commerce.
  • Customer Segments:
    • Homeowners, renters seeking solutions.
    • Affordable, functional furniture for students, professionals.
    • Furniture catering to interior designers, decorators.
  • Key Activities:
    • Product design focusing on affordability, functionality, aesthetics.
    • Efficient supply chain management.
    • Brand promotion through marketing and advertising.
  • Key Resources:
    • Global store network showcasing products.
    • Efficient supply chain infrastructure.
    • Design and innovation centers.
  • Key Partnerships:
    • Reliable, cost-effective material supply.
    • Design collaborations for innovation.
    • Delivery and logistics for improved experience.
  • Cost Structure:
    • Production costs for materials, labor.
    • Store operations including rent, utilities, staff.
    • Marketing expenses for campaigns, promotion.

Related Visual Stories

Who Owns IKEA

IKEA, as a brand comprising two separate owners. INGKA Holding B.V. owns IKEA Group, the holding of the group. At the same time, that is held by the Stichting INGKA Foundation, which is the owner of the whole Group. Thus, IKEA Group is a franchisee that pays 3% royalties to Inter IKEA Systems. 

IKEA Revenue

In 2018, the revenue was $24.89 billion. The revenue increased slightly to $25.23 billion in 2019. In 2020, the revenue dropped to $24 billion. The revenue recovered in 2021, reaching $25.53 billion. The highest revenue was recorded in 2022, at $27.34 billion.

IKEA Revenue By Channel

IKEA Profits

In 2018, profits were 1.45, with an increase of 2.1% in 2019 to reach 1.48. Profits experienced significant growth in 2020, rising by 16.9% to reach 1.73. In 2021, profits dropped by 17.3% to 1.43. The most substantial decline occurred in 2022, with profits falling by 50.3% to 0.710.

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