IKEA pushes for quality as shoppers get choosier

Mon Jul 4, 2016 11:01am EDT
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By Anna Ringstrom

ALMHULT, Sweden (Reuters) - Budget furniture giant IKEA is stepping up efforts to improve the quality of its products and to streamline manufacturing to pare costs, aiming to meet changing shopper expectations and take on new competition.

IKEA Group Chief Executive Peter Agnefjall said the push was due to customers increasingly demanding more durable products.

"Customers expect us to do more (on quality). And nowadays you can't really make products that are throwaway: when you buy a sofa table it needs to be built to last," he told Reuters.

IKEA, one of the world's strongest brands, risks losing market share to new online-mainly furniture stores. Online retailers Amazon and Alibaba and fashion brands Next (NXT.L: Quote), Zara (ITX.MC: Quote) and H&M (HMb.ST: Quote) are also adding home furnishing to their offerings.

IKEA Group, which owns most IKEA stores, is on track for a 2020 sales target of 50 billion euros ($56 billion). But many associate it with disposable quality and complex self-assembly.

Shedding the image could attract shoppers after they've grown older, wealthier and more picky on quality and durability.

That strategy poses a dilemma, though: how to reach target groups for higher-end ranges without compromising its message on affordability.

To offer better products while keeping prices low, IKEA now copies the auto industry, developing platforms for five product groups for economies of scale.   Continued...

A view of the IKEA museum in Almhult, Sweden, June 8, 2016. Picture taken June 8, 2016. REUTERS/Anna Ringstrom