Marketing Strategy in Distribution and Logistics–IKEA

In the marketing strategy, marketing mix is a very important knowledge point. It clears analysis product, price, place and promotion. The purpose is to achieve maximum sales, customer satisfaction and customer perceived value. Place plays a vital role to decide the best channels about the effectively transporting the goods to the customer in the marketing mix. Place not only refers to the location, it also includes the channels of distribution and logistics.

When we talk about this topic, we have to mention the IKEA. As the world’s biggest furniture retailer, it has more than 1600 suppliers to manufacture products and efficient delivery of these products to 186 stores all over the world. It’s enough to prove that IKEA marketing mix strategy is successful. For this reason, this blog is necessary to analyze and study the strategy of IKEA. IKEA’s 28 center warehouses and distribution centers controlled the transport process in different 16 countries. The role of the distribution center is gathered goods and products from all over the world, and then unified dispatching those products to different areas. In general, one country has unique distribution center. As shown in figure 1, IKEA believes that it should be more efficient way of centralization (Abrahamsson, 1993). With the rapid increase of Ikea distribution scale, it will have new challenge that is a distribution center services multiple markets in the future (Distribution/ warehouse in IKEA).

IKEA’s whole supply chain goal is to reduce the total cost of delivery, guarantee the quality of products. At the same time, it also can keep lower environmental impact (Larsson and Qviberg, 2004). IKEA distribution channel members include that manufacturer, dealer, wholesaler, retailer and consumer. In order to keep the advantage of low price on the products, IKEA must use the most direct and cost effective way to transport the products from supplier to customer (Figure 2). Moreover, this approach can achieve the lowest bad environmental impact. Usually, IKEA’s product are adopt packed flat that would make the products easier to be stackable. This way can be saved space and delivered with great efficiency.

images

Nowadays, there are 60 % of IKEA freight is transported by road, 20 % by train, 20 % by sea and only 1% or maybe less by air. IKEA estimate accurately the number of products to delivery for customers. The purpose is to meet consumer demand and provide convenient to them. It also established channels objectives to reasonable tradeoff customer service and cost. In addition, it effectively identified and evaluated the alternatives of the major channel, such as the types, numbers and responsibility. The design of the IKEA marketing channel system is relatively reasonable and efficient.

IKEA has a very strict logistics operation procedure. The whole process must be completed within 5 working days (Figure 3). Such this logistics speed must ensure that it can be implemented all over the world (IKEA report, 2008). IKEA can achieve efficient logistics procedure, because it stores are also warehouse. Customers can pick up the products that they want to buy from the warehouse area.

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As the world’s largest furniture company, IKEA wants to serve more market. Hence, it considers store the low-flow range centrally for larger regions while the high-flow range can be stored in centers that close to the relevant market. At same time, it prefer to the way of direct shipping to reduce transportation costs. In the face of future challenge, IKEA hopes consumers can increase remote shopping on the phone and Internet. For this reason, it needs to consider new, flexible and quick distribution solutions for satisfying customer’s expectations (Distribution/Warehouse, IKEA). Therefore, it needs to optimize delivery innovations facilitated by technology, such as development of voice-recognition technology in Apps, store detailed information about customers in the company database. For the self-service technologies (STTs), IKEA already has a more mature level and helps it to save cost of employees. However, STTs also has some disadvantages, some customers are not convenience to use them, others customers prefer to deal with people. Hence, IKEA should be appropriate to arrange professional service staff to customers.

selfscancheckout_app

Overall, IKEA has its own relatively complete in-store logistics system, so that it can full control the inventory. It has a set of detailed planning and the appropriate marketing strategy, it requires more insightful vision to conform to the development of the future.

 

Video:

https://www.youtube.com/watch?v=11AehTPD-Vg

 

https://www.youtube.com/watch?v=rkEs-RFmWC0

 

 

Reference

1. Abrahamsson, M. 1993, Time-Based Distribution, The International Journal of Logistics Management, Vol.4, No.2, pp.75-83.

2. Distribution/ warehouse in IKEA

http://www.ikea.com/ms/en_US/jobs/business_types/distribution_logistics/

3. IKEA report, 2008, Chinese federation logistics & purchasing.

 

4. Larsson, B and Qviberg, O. 2004, Evaluation and Justification of an RFID     Implementation-Pilot at IKEA Customer Distribution Centre, Linköpings universitet/Ekonomiska institutionen.

 

Appendix

Figure 1

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Figure 2

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(IKEA-2012)

Figure 3

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(IKEA report, 2008)

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