Ikea Emerges with Prominent Growth Plan: Furniture Leasing
These are the days where you can “share” just about anything with just about anyone. And just when we thought the subscription model of business had been exhausted and dozens of industries had been refreshed, Swedish furniture retailer Ikea joins hundreds of businesses in pivoting as they employ these promising strategies.
Ikea recently announced what’s up next for the retailer: furniture rentals on a subscription basis. The company plans to offer customers the option to lease pieces of furniture that they will then return at the end of a time period, and then pick out new pieces of furniture for the next period. It will also include a furniture buy-back option. Redecorating just got a whole lot easier, not to mention incentivized, with hopes for rises in customer retention while prolonging product lifespan.
The pilot is to be launched this quarter in Switzerland, where it will include both office and home furniture rentals. Depending on the outcome there, Ikea may roll out the initiative worldwide, according to the Financial Times.
Ikea has long prided itself on its high-quality, yet inexpensive furniture. Additionally, Ikea has become known for its flat-packing and self-assembly product model, allowing customers to build its ready-to-assemble (RTA) products. This model reduced shipping expenses significantly — furniture can literally be flat-packed — while rebranding furniture into a DIY project for adults.
Eventually, however, either the fun wore off or consumers have come to prefer even more convenience, prompting platforms like TaskRabbit, which connects users with freelancers-for-hire to complete one-off tasks and errands, to take off. In an effort to capture some of this burgeoning market and harness the resource thousands were using for product assembly, Ikea partnered with TaskRabbit in Sept. 2017. With its pilot of furniture leasing to launch in 2019, Ikea continues to adapt to consumer trends and join the sharing economy, as detailed by the Financial Times.
Ikea’s leasing project enables consumers to “share” furniture by agreeing to rent pieces for a certain period of time after which other consumers may rent the very same pieces once they are refurbished by Ikea in-between. For Ikea, this “scalable subscription service” is much more than the glamorous stream of recurring revenue that has made the subscription model popular among business development teams and favored by venture capitalists. As told in an interview with the Financial Times, this business model will not only improve Ikea’s manufacturing processes, making it possible to easily swap products like kitchen cabinets at the end of leasing periods, but will prolong product lifespan, as well. Ikea’s development team is also considering to launch a “spare parts” business, aimed at selling interchangeable parts such as screws and hinges.
Ikea’s new project was initiated as part of the company’s pivot toward a circular business model — maximizing resources and minimizing waste by selling products that can be reused to create new ones, or refurbished and resold.
Torbjorn Loof, CEO of Ikea’s holding company, Inter Ikea, who leads company branding, mentioned in the aforementioned interview with the Financial Times that Ikea plans to reduce landfill waste, recycle products and reuse materials such as wood, metal, foam and textiles by launching its furniture leasing project, thereby prolonging lifespan of products. In fact, Loof mentioned that Ikea hopes to reduce its overall climate footprint by 15 percent by reducing the footprint per product by 70 percent in the next four years.
While Ikea’s furniture leasing project represents a large portion of its long-term growth plan, it has also announced other potential avenues for expansion. Ikea seeks to move beyond large outlet stores typically situated in suburban areas, and instead relocate to urban areas with revamped, smaller stores and utilize the concept of pop-up shops. Digital solutions such as virtual reality will soon be incorporated to help consumers with furniture planning, while customer services will be upgraded through advanced online sales and better home delivery options. Ultimately, with its furniture leasing pilot soon underway and its overall growth strategy, Ikea may gain more traction while maintaining its reputation of affordability, coupled with its vision for convenience and sustainability.
Photo Credit: Wikimedia Commons
Photo Caption:Ikea executives plan to roll out a new leasing strategy among other potential avenues for expansion.