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IKEA Home Delivery – Why It Will Never Pay

Posted on January 25, 2010 at 1:12 am
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Why is it so difficult to buy things from IKEA’s website?  If you’re like many who’ve tried to shop IKEA online or through IKEA’s phone order service, IKEA Direct, you’ll know how irritatingly frustrating an e-commerce experience it can be. From the limited inventory to the outright outrageous shipping charges, IKEA is just not friendly to the home shopper.

All that stuff is already flat-packed to reduce shipping costs, right? So why does it cost a fortune? Find out how an internal memo from over two years ago spelled out your fate as a consumer and the future of Home Shopping at IKEA … after the jump.

Current IKEA Shipping Rates

IKEA Shipping for most orders less than 70 pounds are shipped through UPS. Does IKEA offer reduced rates based the economies of scale? Seemingly, no. This is a table for rates for shipping from IKEA within 210 miles of a store/distribution center:

ikea-shipping-rates-200-miles

As you can see, any item under $20 could cost you nearly as much in shipping! The same is true of a store in the Midwest – nearly 1000 miles away. Why is this? Does IKEA have a death wish for their Online Sales and Phone Sales Channels? Apparently so.

No Further Investments in Home Shopping or Online Sales

For years, we IKEA aficionados have bemoaned the sorry state of IKEA’s home delivery options. To my great chagrin, IKEA continues to delude the common consumer into believing that they have a valid e-shopping option available:

ikea-online-shopping-instructions

Although thankfully the website has undergone a vast improvement in the last year or so (if you leave out the large quantity of Flash), ordering online is still virtually impossible and at a minimum, it’s excruciatingly painful. Even IKEA’s phone order service, IKEA Direct, has been difficult to work with, lacks in a full inventory from which to choose, and charges outlandish prices for shipping. And if an order arrives damaged or incorrect, you are often at the mercy of whoever answers the phone or at worst, up the proverbial creek. Even so, we all held out hope for the future.

Then in December of 2007 an IKEA insider privy to internal IKEA information, IKEA.Employee, let us in on the existence of an internal memo that spelled out the fate of IKEA Home Shopping. I was able to obtain the complete text of the document and will share key points with you, though I can’t reveal my source or the text in its entirety.

From an internal IKEA memo, dated December 7, 2007:

In the future, there will be no further investments to develop the Home Shopping or Online Sales channels … The decision by the board is based on the conviction that IKEA can give customers the best offer and the lowest price by making the range available only through the stores. Home shopping and online sales require considerable investment and a specific distribution set up, which is a big undertaking. Today we are not prepared to make that committment.

Although that memo was issued over two years ago, we’ve not seen any changes to date in the existing e-commerce experience, nor has there been any indication that IKEA is ready to pull the plug on Home Shopping just yet. But they’re not investing any more in the future development of these channels, either.

WHY IKEA Won’t Expand Home Delivery Services

Recently, I spoke with Joseph Roth, IKEA’s US Director of Public Affairs. I asked him about IKEA’s future plans for e-commerce and distribution in the US and the planned Midwest Distribution Center in Joliet, IL. He gave me a few key insights as to why home delivery will never pay at IKEA:

  1. The above-mentioned memo states,

    “the IKEA Group shall concentrate its resources on developing the IKEA stores as the only sales channel and to make an even more attractive shopping experience for our customers.”

    The IKEA Experience is all about being in the store – seeing the furniture in the showroom vignettes, getting ideas from the room and home setups, and hitting the AS-IS room. From the moment you step in and smell that cinnamon roll scent wafting through the store, you’re in another place mentally …and all that translates into a bigger bottom line.

  2. The instant gratification of online shopping precludes the build-up of excitement before an IKEA store visit. Many of us aren’t within an easy driving distance to IKEA (IKEA is only in 19-20 US States), so it’s a commitment of time, and a day-trip for the majority of IKEA US customers. This lends to the fanatacism that is evident here at IKEAFANS and elsewhere – people look forward to a trip to IKEA.
  3. IKEA’s distribution network is not set up for shipping individual items. IKEA’s distribution is based on mass quantities moving in the most efficient manner possible – not on shipping to individual homeowners. IKEA does not consider Home Shopping as a factor in their distribution network AT ALL. In response to the cry that ‘IKEA is everywhere, why can’t they just expand the delivery service?!”, Roth says, 

    We’re not everywhere. We have only 37 stores in the US and we’re only in approximately 20 states. In Florida for example we have only 3 stores, and only one of those stores is in South Florida.  2/3 of our stores in the US are East of the Mississippi.

    This doesn’t lend itself to efficient distribution to the level needed to make a home delivery option profitable.

Insights on IKEA’s Business Model

We also talked with Kelly, a Vice President in a Fortune 300 company, who has more impressive insights than we do personally. She says,

I think IKEA dabbled in online commerce knowing that they would make money, but never truly committing resources or thought leadership on how to integrate it with the rest of their business because key players weren’t behind it philosophically. IKEA has a flat org[anization] structure that defers to the local in the stores- but Home Shopping was a Home Office controlled program. And I think they always felt it undermined the store and didn’t serve the range.

Another long time IKEAFan, Narf, says,

The economies of scale aren’t there for larger items like furniture – not only would a lot be considered “oversized”, but package handling by any of the common shippers rarely is with enough care to assure safe arrival.

True enough. Many online merchants are offering small items for sale, like online retailing giant Amazon, whose average sale I imagine is far lower than the average IKEA sales receipt. Far too many equate IKEA’s online shopping dilemma to be similar to that of Amazon. But it’s not the same.

Joseph Roth, IKEA’s US Director of Public Affairs says,

We are always striving to improve, however we are not trying to make [our online experience] like, say…Amazon. The IKEA experience will always be an interactive one, the way it currently is. Shipping a BILLY Bookcase is still going to cost $50-$60 [in the future]…

IKEA is simply a different business model – one that demands an in-store experience. In sum, IKEA will never be an affordable option for home shopping…it’s just not meant to be.

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