Photo: Flickr / Jules Antonio
The U.S. market isn’t easy to enter for foreign furniture retailers.Competition in general retail is gigantic, the cost of business is high, land is expensive, staffing costs are high and the furniture production industry is weak.
In fact, after entering the U.S. market in 1985, IKEA spent a decade struggling with low sales. It didn’t open a single new store between 1993 and 1999.
But IKEA eventually figured it out.
Former IKEA CEO Anders Dahlvig explained his strategy for entering the U.S. in his book “The IKEA Edge
.” He describes it as “straightforward:”
1) Focus on IKEA’s strongest products — The bedroom and kitchen ranges of products needed to become the “engine of the sales growth,” because these were IKEAs overall strengths.
2) Aggressively keep prices low — It’s always been a priority for IKEA to keep prices as low as possible, but it would take extra steps to get this done in America. It need to “radically reduce” staff turnover and create a stable working environment in the retail stores, and keep in-store operations streamlined.
3) Economies of scale — Without this, there would be no way to maintain its competitive positioning. IKEA needed to add tons of new stores if it wanted to invest appropriately in marketing and make it possible to build local production. “The only way to get a more stable profit development over time in the United States is the source locally and thus hedge against exchange rate volatility,” writes Dahlvig.
IKEA pulled it off, and the strategies paid off over the next eight years, and IKEA opened its retail stores all over the country. Though IKEA still generates most of its sales in Europe, it made it up to a solid spot, climbing to second in market share by 2009.
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