In April 2019, IKEA opened Planning Studio, the compact store oriented around consultation for the urban life-style, in Manhattan. This 17,350 sq.ft. store is only one-fortieth of the size of their biggest stores, and it covers only 1,000 of the 9,000 items in inventory. The initiative in Manhattan is the third one in the world, after the other two located in London.
I recently visited the studio, which made me think of what IKEA meant to me and where they are headed. My impression of IKEA had been that it was a furniture version of Walmart with their large store size and the general coverage of many home items. For both entities, people tend to plan their visits ahead of time and intend to buy a lot in one trip. Moreover, these stores are known for being set in suburban locations. With this context, IKEA’s store-design masters customer-seduction for their impulsive purchases.
Impulsive buy in the big-box stores
One research study shows that 50% of what’s being purchased in the general retail experience is unplanned. This impulsive buying has been a huge driver of the retail industry, since Victor Gruen, an Austrian architect, pioneered the post-war, modern shopping mall. His design intentionally leads customers to take long and confusing paths inside vast shopping malls. Losing track of the original intention drives people to purchase impulsively; this customer psychology is called Gruen transfer. At IKEA, with their fixed pathways in their stores, customers are exposed to more products compared to regular retail stores, where customers only explore an average of one-third of the total floor space.
“Almost 20% of IKEA’s buying decisions are based on logic and needs. 80% of buying decisions are based on emotions.”Richard La Graauw, Creative Director of IKEA USA
The ground floor of regular IKEA stores, where boxed products are stacked and stored, gives a similar impression to the Walmart store setup. In contrast, the second floor, where their model rooms are located, sets IKEA apart from Walmart. The store experience on the second floor alongside IKEA’s branded product line make IKEA a much more joyous destination than Walmart. Here are some examples:
- Its showrooms are not only about testing and touching their products like in many other brick-and-mortar stores. Rather, customers can feel, play, and sometimes sleep on their home solutions.
- Its products’ Swedish naming schemes are cute and playful, and also sound innocent. In fact, the object names are also well-planned for managing products easily.
- IKEA effect — The magic that causes people to feel attached to the products.
The IKEA effect is the cognitive bias that causes people to see a disproportionately higher value in something when they are involved in creating the product. The IKEA effect was first introduced by professors Michael I. Norton, Daniel Mochon, and Ariely Duke. They ran studies to observe how people valued origamis differently amongst people who crafted them and people who did nothing with them. It concluded that people who had crafted their origami, valued the created object disproportionally higher than those who hadn’t been involved with its creation.
These professors also ran tests to see how people’s motivation altered depending on whether their actions were seemingly meaningful or not (sisyphus). It showed that the subject’s motivations were disproportionately lower in the latter case. IKEA’s products come in pieces, but they are fairly simple to assemble, especially with the graphic instructions given. Additionally, customers’ labor contributes to their home improvements. This unique relationship established between IKEA products and the people purchasing them keeps their branding strong. This strong branding also contributes to a strong impulsive purchase in IKEA stores.
Recent IKEA initiatives in digital solutions
Looking back IKEA’s history, Ingvar Kamprad, the charismatic founder and director, framed this company’s significant characteristics since its founding in 1943 until Kamprad’s retirement in 2013. Kamprad pioneered the business of selling the flat-pack furniture, and his mission had been to bring affordable home furniture to the public.
“To design a desk which may cost $1,000 is easy for a furniture designer, but to design a functional and good desk which shall cost $50 can only be done by the very best.”Ingvar Kamprad, IKEA founder
This quote above seemingly reflects what IKEA has achieved in its long history. Ingvar began his business experience by reselling wholesale matches when he was a child. His natural understanding of business opportunities with reselling extremely cheap products was a driver for IKEA’s immense success. In 2018, Ingvar passed away, five years after leaving IKEA.
Today, IKEA explores unique solutions that are different from what IKEA was originally known for. For example, IKEA acquired TaskRabbit, a platform to connect people who are willing to work for small tasks; it’s essentially a gig-economy marketplace for handyman work. The platform benefits IKEA customers who don’t succumb to the IKEA Effects or simply don’t have the time to assemble their purchases, by helping them find people who are willing to assemble their furniture for them.
IKEA has also expanded their digital presence recently, in contrast to their long-time passive stance on online retail; the physical store experience had been the center of their brand. Today, people can purchase IKEA items online just like any other ecommerce website/outlet. Additionally, they launched the Augmented Reality (AR) experience that let customers put virtual furniture in their rooms. These digital shifts are necessary in today’s market climate, however, IKEA may be losing opportunities for getting customers to fall into the Gruen transfer. In fact, ecommerce sites are full of the digital version of the Gruen transfer to get customers to buy more. Some may argue that this is more effective online than in the physical store.
“The business model of IKEA having a blue box in a cornfield, and you jump in the car with your family and have an ice cream [in the store], is not the only thing we should offer our customer… For the majority of people in the world, Ikea isn’t accessible. Apps can make Ikea accessible.”Michael Valdsgaard, leader of digital transformation at IKEA
IKEA Planning Studio
IKEA Planning Studio is another sign demonstrating how IKEA is departing from their cookie-cutter big-box strategy; the highlight of the studio is the private consultation desks in the basement. As customers enter the store lobby, the space is quiet and empty except for some small model rooms, which remind them that this is in fact IKEA. The main purpose of the lobby is to wait for IKEA staff and have some light consultations. Some customers may be led to the private consultation area in the basement.
The second floor is closer to what you would expect from the regular IKEA stores; this floor is filled with model rooms and many of them have an urban small apartment theme. For instance, some rooms are specific to certain room sizes such as 333 sq.ft. or 400 sq.ft.
The space has an extremely high ceiling. Some walls are filled with wall-mounted furniture from top to bottom. It looks like IKEA wants to demonstrate items fitting in a small floor dimension, while using the high ceiling to display many different variations.
“We really wanted to challenge ourselves to use real apartments.”Amy Singer, communication and interior design manager at IKEA
Many model rooms are decorated to look just like anybody’s regular apartment. Many decorations and objects are not IKEA products, but rather help simulate the realistic space. It’s a bit similar to their AR app in terms of helping customers visualize how IKEA furniture would fit into their real lives.
“We decided it was really important to focus on solutions for small spaces rather than have product to take away,”Amy Singer, retail designer at IKEA
There is one more thing missing in this store- the blue IKEA bag. Customers cannot purchase items in the store and take it home. The warehouse function, which is another main purpose of a physical store, is not part of this studio; all purchased items in this studio need to be shipped.
After looking back on the history and seeing these changes, I would like to keep observing whether these adaptations will grow or hurt IKEA in the future.