The Sleeping Giant: IKEA appliances and electrical retail competition

Just over one year ago, Sweden’s biggest export (after ABBA) opened a new warehouse in the airport-adjacent suburb of Tempe in Sydney. The mammoth IKEA Tempe store sells everything from cabinetry and crockery to furnishings and frypans, and most importantly, for competing electrical and appliance retailers at least, a range of almost 40 appliances across cooking, dishwashing and refrigeration.

IKEA has hundreds of stores across the world, including seven Australian stores in Logan (QLD), Homebush and Tempe (NSW), Richmond and Springvale (VIC), Perth (WA) and Adelaide (SA). With The Age reporting just last week that the company has bought up land for a new distribution centre in Victoria to service its Australian network, there is no indication that this monolith of retailing will be gone any time soon.

With a radically different shopping concept and an appliance range that puts it in direct competition with electrical retailers, IKEA is certainly one to watch in this industry.

So what can traditional retailers learn from the Swedish meatball-selling home furnishing megastore, and is IKEA a threat in Australia’s competitive retail landscape?

First Impressions

Outside IKEA’s Tempe store.

One does not simply walk into IKEA — these things need to be planned. As this writer discovered from an ill-timed expedition on a Sunday afternoon (in the middle of school holidays, at the height of summer), the experience can be an ordeal. Appliance Retailer chose to visit on a quiet Thursday afternoon to scope out the store and, in the calm between the retail storms that this store no doubt endures, there was plenty to see.

As both a brand (stamped onto virtually every product in store) and a retail shopfront, IKEA creates a full end-to-end experience for consumers. Upstairs, there is a dedicated showroom space, similar to many other furniture retailers, with faux bedrooms, bathrooms, kitchens, laundries, work spaces and living rooms, all kitted out in different styles to showcase the broad appeal of IKEA products.

Downstairs, there is a pick-and-purchase “Market Hall” area with racks, shelves and bins filled with products such as lamps, tableware and soft furnishings, as well as any number of inexpensive FMCG products that you probably weren’t aware you needed. This is followed by the Self-Serve Furniture Area stocked with rows upon rows of carefully-categorised furniture from the upstairs showrooms, all flat-packed and ready to purchase and put together.

IKEA’s warehouse looks like the set for an Indiana Jones film.

IKEA maintains that the ‘take it off the shelf yourself, get it home yourself, assemble it yourself’ model helps to keep costs down, and with single beds available for $69 and two-seat sofas for $199, it’s hard to argue with the prices.

“It’s a real home!”

Back up in the showroom, the illusion of being inside someone’s house is quite powerful. The fake bedrooms, kitchens and living rooms are meticulously fitted out with cutlery in the drawers, shirts hanging in the wardrobes, photos and Swedish books on the bookshelves, and even mock diplomas in the office spaces.

One of the display kitchens inside IKEA.

On a quiet Thursday afternoon, one has the distinct feeling of walking into a town of perfect IKEA houses, recently abandoned due to some mysterious apocalyptic event. (Admittedly, the jostling crowds and grabby hands found in IKEA on Sunday afternoons in summer have their own airs of the End of Days too).

IKEA doesn’t sell electronics, but rooms are fitted out with fake Homefill-style flat panel TVs (some with screen measurements printed on, to give an idea of relative space) as well as fake Apple computers. There are real televisions in some rooms (all LG branded) showing demonstration DIY videos, and real Sunbeam appliances are also used to flesh out other living spaces, with a Mixmaster appearing in one kitchen and Sunbeam coffee machines in others.

A fake Apple computer completes the home office look.

There are also miniature apartments dotted through the space — a store-in-store concept of sorts —with signage outside showing a floorplan and inviting customers to “step inside and take a closer look at our home”. So realistic was this space (school bags hanging on hooks, artwork on the walls) that one child walking through the space shrieked, “It’s a real home!”

These illusions of realism also allow young couples, home makers and Vogue Living enthusiasts to imagine themselves in any number of possible realities, picturing what a certain rattan chaise longue could do for their breakfast nook or how a change in cabinetry would be sure to spice up the open-plan kitchen.

IKEAppliances

So what’s the threat if IKEA sells a few appliances in amongst the duck egg-blue friand plates and faux fur throw rugs?

There’s the rub. Just like the Old Spice commercial that shows you the man Your Man could smell like, IKEA is the store that shows you the home Your Home could be. Certainly, consumers are capable of walking out with just one cushion and a nice serving plate, but there is a sense that the whole suite of IKEA products gains relevance as a collective look book. The sum of the whole is greater than the parts.

So to get the Shabby Chic Country Kitchen, one needs to buy the KAUSTBY Chair, the ARV tableware and the DÅTID oven to boot (these products, as with all products at IKEA, are given Swedish names that have often been the subject of parody).

While you’re out picking up the pots and pans, why not pick up the stove top that you’ll be cooking on as well? If you’re buying a dining table and chairs, get a freestanding cooker, splashback and range hood to match.

In situ displays show consumers how IKEA appliances fit into the kitchen.

In fact, if you’re the kind of person that prefers to do their shopping in one place, you can design your kitchen with the assistance of the IKEA Home Planner (a Computer Assisted Design program that offers a 3D view of your space), then add the cabinetry and flooring, throw in the appliances, buy the servingware, set the table and you’re done by dinner (or, more likely, 6 to 8 weeks).

Every IKEA store is perfectly designed to take you on the emotional journey from beginning to end, all in the time it takes you to walk through the store. The store itself — and the renovation process it promotes — takes you from initial inspiration (‘This is the home Your Home could be like’) and then slowly introduces products, designs, accessories and ideas.

By the time you reach the part of the store that sets out products in a traditional retail format for purchasing (ovens in rows, flat-packed furniture) you’re already emotionally connected to the world that these products create. Your ideal home has already been designed; the appliances are just a necessary purchasing afterthought. The transactional process becomes personal.

The Nuts and Bolts

Appliances on display inside IKEA.

The appliances themselves are not exactly ultra-premium products. There are just enough styles and designs to make you feel like you’re buying something individual (and with the mood board you’ve created over the past hour, it certainly feels individual) but IKEA is only required to cookie cut 8 oven styles, 4 microwave ovens, 8 cooktops, 13 rangehoods, 1 freestanding cooker, 2 dishwashers and 4 refrigerators.

Interestingly, the ovens, cooktops, microwaves and rangehoods don’t bear any visible branding, but the integrated dishwashers are stamped with the IKEA name on the inner lip of the door. The refrigerators are all Whirlpool branded, but appear in catalogues under the ENERGISK moniker, and IKEA’s website directs customers to Whirlpool for all enquiries about these products.

The appliance section is where IKEA really differs to other brands.

High-end suppliers such Miele, Gaggenau and Smeg build their whole brand identity on the dream world that one appliance can create. The showrooms are luxurious and designed to appeal to consumers who are happy to spend $3,000 on a rangehood or $12,000 on an induction cooktop. These people spend their weekends entertaining (and showing off the appliances to friends, who are potentially prospective customers) and they want the best appliances to make them look like pro-chefs in the kitchen.

With these brands, a whole world is created from one product.

The IKEA model flips this on its head. This store creates an entire whole world for the consumer and, like the production designer on a Scorsese film, they’ve seemingly thought of every little detail. The kitchen is built from the ground up, and the appliances are slotted in as an afterthought — you still need to be able to cook in your dream kitchen after all.

The Up-Sell

There is no denying it, IKEA prices are cheap.

But there is a secret to the cheap prices that ties in very neatly with the ‘what Your Home could look like’ feel of the store. Every time you pick up that one little product your new kitchen couldn’t possibly do without, you add to the bill at the end.

The Market Hall section of the store is filled with small, low-priced items that are easy to add to the basket.

Once again, the sum is much greater than the parts. At $5, the toile de juoy-inspired EMMIE LAND cushion cover is nothing to bat an eyelid at, but after stocking up on a few and getting the matching sheets quilt cover, the numbers add up.

But this is a store where no up-sell is needed. The customers become their own sales staff, talking themselves into getting an extra product or an accompanying accessory, all in the name of completing the image of their ideal home. And that idea extends to appliances too — if you building a whole kitchen, it’s not that much extra effort to throw in a fridge to keep the food. And if you’re organising cabinetry, it makes sense to buy the appliances that fit.

While customers act as their own silent salespeople, there are also real staff that wander the store to assist customers. But the focus is very much on do it yourself — there are tear-off-and-keep paper tape measures throughout the store as well as store maps (with areas for writing product numbers and notes) and even IKEA-branded pencils for jotting down ideas.

The sales process is all about empowering the consumer to make their own decisions and designs, whilst always being nudged in the right direction.

Browse through the catalogue, grab an IKEA pencil and measure up the products on offer.

You can checkout any time you like, but you might never leave

Like Masters and Costco, IKEA offers consumers the opportunity to have a meal inside the store. Get into IKEA half an hour before it’s officially open, and you’ll still be able to sit down for a coffee, a hot breakfast for $2.95 or even a plate of IKEA’s famous Swedish meatballs. And if that’s not enough, you can purchase a range of frozen meal options in the Swedish Food Market near the store’s checkout.

Mirroring the products sold in the store’s restaurant, IKEA-branded frozen food is available to purchase at the checkout.

While it might seem like the store is offering these discounted meals out of pure benevolence, it is in IKEA’s interest to keep you in the store for as long as possible. It is quite feasible to create an entire home in this store, from the dining room table down to the food in the ENERGISK refrigerator, without ever having to leave IKEA.

This is the final piece in the puzzle, and just one more reason retailers should be clued in on how the IKEA concept works. While consumers may not get the specialised advice that they can find at their local electrical franchise or whitegoods store, they are walked through the entire buying process and literally spoon-fed their retail experience. For many, that makes IKEA an enticing and easy option for buying homewares.

IKEA and electrical retailers

There is no word on whether IKEA will expand its appliance offering in Australia, but it doesn’t necessarily need to if it is going to threaten the customer base of electrical retailers in the major cities. As a global retail group, it has the strength and buying power behind it that independent retailers (and even larger Australian franchises) could only dream of.

But while the complete offering that IKEA presents is certainly alluring for some consumers, there are many things it doesn’t offer. Like a classic British TV drama, the glossy faux apartments and stylish interiors upstairs are matched by the hard work that is required in the industrial-feeling downstairs space. Sure, you can choose your ideal home, but you still have to pay plenty more for delivery and you’ll need to assemble it yourself. And while some people will be drawn to the ease of buying appliances at IKEA, many will be put off by the well-known brand badging that is missing on most of the products.

As IKEA grows in Australia, electrical retailers should focus on what they do best — offering personalised assistance, sound product knowledge, well-known brands and great after-sales service.

But be aware: the store that sells everything offers stiff competition for electrical retailers. And when it comes to selling appliances, this sleeping giant may become a lot more aggressive in the Australian market in the future.

While IKEA only has seven stores in Australia, it has a strong presence in the Northern Hemisphere, especially in Europe.

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