Home » SWOT Analysis for IKEA (2021)

SWOT Analysis for IKEA (2021)

For many, IKEA is synonymous with sleek, simple, and affordable furniture design you assemble yourself. It is one of the most popular and accessible furniture brands in much of North America and Europe, and can be a favorite choice for consumers who are looking for an easy solution to their furniture needs. Its reputation is all but solid in consumers’ minds, but what potential does the company have to grow or fall victim to internal or external issues?

Let’s explore the strengths, weaknesses, opportunities, and threats facing IKEA as a company.

Strengths

1. It embraces its “democratic design” approach.
IKEA has an approach to design called “democratic design” that focuses on five key elements: form, function, quality, sustainability, and low price. The combination of these elements is critical to finding just the right mix in the eyes of consumers, and IKEA has all but mastered this art. The company builds just the right amount of flair and appeal into its designs, uses affordable yet sturdy materials, then passes all savings along to the consumer.

IKEA offers over 9,500 unique products. (Forbes)

2. IKEA does extensive market research into consumer wants and needs.
A major aspect of its success with product development and design is careful attention to what real customers actually want from its furniture. First and foremost, IKEA knows that its target customers are those that want affordable furniture that will hold up under most wear-and-tear conditions yet still have an attractive design. Many of its customers are okay with assembling their own furniture if they can find the right mix of design and value, and IKEA knows how to deliver on that desire.

IKEA is a Swedish company founded in 1985. (Forbes)

3. It has mastered its supply chain.
A company is only as good as its ability to deliver the product to consumers and retailers, and this company has strong control over its supply chain and delivery processes. This ensures that its stores are always fully stocked, and that it is able to meet consumer demand for orders placed directly through the retailer online for home delivery.

IKEA was one of the top 50 best employers in the world. (Forbes)

4. Its products are highly affordable.
One of IKEA’s hallmarks is how affordable its products are. From its best-selling bookshelves, to couches and chairs, to bedding, on down to serveware and décor pieces, every product is at an accessible price point for most consumers. Products may not feature deluxe finishes or materials, but they are still of good quality, and the low cost is a major deciding factor for its consumers. The ability to essentially furnish an entire living space in one trip without breaking the bank creates massive appeal.

IKEA’s annual revenue stands at €39.6 billion. (Statista)

5. It boasts a nearly endless variety of designs.
Another key selling point for IKEA is the fact that any consumer can find something to suit their individual taste. Each product type has a wide variety of design concepts and varieties available to choose from. From colors to textures to styles, IKEA offers a nearly endless combination for many of its products, and all products are accessible either online or from one of its warehouse stores.

Furniture and home furnishing sales in the United States reached $120.5 billion. (Statista)

6. The in-store consumer experience is second to none.
IKEA’s storefronts are a master class in the consumer experience. Guests are guided through carefully manicured showrooms that feature floor models of many of their pieces, as well as mockups of actual rooms that show how various products can be paired together in different ways.

Then, once customers have made their selections, they enter the warehouse and purchasing area where they are able to get the product to take home. Bonus areas of the store, such as the restaurant and grocery corners, add a little more fun to the experience.

Nearly 80% of its total sales come from existing retail stores. (Statista)

Weaknesses

1. Product assembly can be frustrating.
Anyone who has purchased an IKEA product is excited about the resulting design and the low purchase price, but consumers also share the sometimes frustrating experience of assembling the products themselves.

Instructions can occasionally be confusing, and the assembly process has been portrayed comically in many mediums. Furthermore, the modular nature and potentially inconsistent packing process may mean that some pieces are not included in the package upon pickup or delivery, which can mean additional waiting time for those pieces to arrive.

The global furniture market commanded $509.8 billion in revenue. (Statista)

2. Its products are of comparatively low quality.
While each piece is functional and reliable, IKEA also believes in keeping costs low, which means that the materials and finishes are not premium on many of its offerings. The concept of “budget furniture” holds true almost across the board – which may be fine for most consumers, but also creates a realistic expectation of what the finished product will look like.

Consumers made 825 million total visits to IKEA stores in 2020. (Statista)

3. Its products are mostly standardized.
While each product line offers numerous options in design and color, once a specific product is chosen, there is not much opportunity for customization. A white bookshelf will always be a white bookshelf, and will look the same as other white bookshelves purchased by others. This modular design process makes mass production and distribution easier, but those that want more control or customization in how their finished product will look should search elsewhere.

Nineteen percent of products sold by IKEA are for living room furnishings. (Statista)

4. It relies on third-party manufacturers, which means quality standards might slip.
Like many companies, IKEA contracts with outside manufacturers for most of its products. One way to guarantee product quality is to keep everything in-house, but outsourcing the work helps to keep costs down, which is a primary driver of its business model. As a result, it must rely on its manufacturers’ ability to deliver on the final design and quality specifications. Furthermore, final quality standards may suffer in some ways if all manufacturers do not keep to the same standards.

There were four billion visits to the IKEA website in 2020. (Statista)

5. It has been vulnerable to bad press.
Any company that produces furniture on such a massive scale can fall prey to bad PR regarding the materials it uses. IKEA uses large quantities of wood for its products, which has led some activists to bring it to task for its impact on the environment. Additionally, some consumers have brought lawsuits against the company for faults with the quality and assembly of its products, which have caused injury and death in extreme cases.

Twenty-two percent of products sold by IKEA (its largest sales segment) is for the bedroom and bathroom areas. (Statista)

6. It does not have a strong presence in Asian markets.
The majority of IKEA’s corporate footprint is in North America and Europe, which is a missed opportunity in a major way. Consumers in Asian nations are becoming increasingly receptive to Western retailers, but IKEA has yet to take full advantage of this opportunity.

IKEA is one of the world’s most valuable brands. (Forbes)

Opportunities

1. It could expand into additional markets.
IKEA already has a fairly firm grip on the European and North American markets, but entering into Asian or South American markets could give them additional avenues for sales and impact.

IKEA operates 445 stores worldwide. (Statista)

2. It can focus more on online sales.
More and more consumers are purchasing their products online, and while retail sales from its storefronts are still a strong segment of its revenue stream, IKEA can continue to make the online experience even better. This will allow more consumers to gain access to its products.

Only 16% of IKEA’s global sales come from its website. (Statista)

3. It can expand into grocery-only outlets.
Surprisingly, IKEA does more than just furniture. They have a small handful of standalone restaurants and grocery stores and even have a few apartment housing locations. One major opportunity could be expanding its footprint for grocery and restaurant locations, capitalizing on its popularity with customers at its main furniture retail locations.

IKEA’s brand value is $48.1 billion. (Statista)

4. It can appeal to eco-conscious consumers in a more targeted way.
IKEA has taken great strides to use sustainably sourced products, and it can continue that momentum by finding additional ways to utilize this strategy. More consumers are making this a part of their decision journey, and eco-friendly materials can be a major selling point. IKEA is also taking steps to lessen its overall impact on the environment, which is another boost to its brand image.

Germany is the country with the highest sales numbers for the company. (Statista)

5. It could introduce a premium product line.
While most of its products are fairly standardized and basic, IKEA can branch out into premium designs and materials for some of its signature products. Budget-conscious consumers already see it as a dependable choice, but creating an offering for consumers with more discerning or luxury tastes could create an entirely new customer segment to tap into. It could be as simple as using luxury materials for existing designs or creating entirely original styles at higher price points.

IKEA was the most rated the second-best furniture retailer in the United States, after Ashley Furniture. (The Spruce)

6. It faces stiff competition for budget furniture.
While it is one of the biggest household names in budget furniture, IKEA is facing major competition from other budget retailers. Warehouse stores and smaller operations alike are embracing the move to DIY furnishings, which means that IKEA must continue to innovate in order to stay ahead of the market.

IKEA saw a 4% sales decrease in 2020. (Comfy Living)

7. Increasing consumer income could cause people to shop elsewhere.
It may seem counterintuitive, but if consumers have additional expendable income, they may choose to do their business at a more expensive retailer. This could leave IKEA in the dust if consumers decide to abandon lower-cost options in favor of these premium purchases. This is certainly a normal threat, but one that the company must take seriously.

IKEA had 217,000 employees in 2020. (Statista)

IKEA is well known for furniture that is fun to shop for, easy to design around, and relatively inexpensive to purchase, but it is also known for products that can be difficult or even frustrating to assemble and may not last over time. It can build on its positive advances and rectify some of its weaknesses, while taking advantage of new opportunities as they become available to solidify its spot as one of the largest and most popular furniture retailers in the world.

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