Following the success of its in-store restaurants and food markets, furniture retailer Ikea is planning to offer private label products in its outlets from next year. The strategy of product diversification reflects that of the large mainstream food retailers. Ikea’s specialist Swedish food offerings and its near cult status among consumers should make for a successful venture.
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Next year, the Swedish furniture retailer will launch its own range of food products across its stores worldwide, the Grocer magazine has reported. Ikea began selling food in the 1980s, and this concept has since expanded to become ‘Food Markets’, which encompass both Ikea’s successful restaurants and its food retailing.
Ikea’s Food Markets currently stock 150 Swedish products, few of which are sold under the Ikea name at present, but the retailer aims for Ikea-branded products to make up 30% of the groceries it sells by 2007. This expansion of its private label food offering is the inverse of the strategy adopted by retail giants such as Tesco and Wal-Mart, which have started to sell home furnishings in recent years, to counter falling food revenues.
While it is unlikely that Ikea’s food offering will ever overtake its furniture in terms of sales, the addition of more Ikea-branded products will almost certainly reinforce the store’s status as a household name – albeit one with a cult following. Similarly, it is unlikely that consumers will visit Ikea solely to buy food, yet the same product diversification strategy has led Tesco to unveil its non-food Homeplus store concept in the UK.
The market for mainstream groceries, dominated by the large supermarket chains, is highly competitive. Yet as spending on mainstream products slows, the same cannot be said of niche brands. Ikea’s plan to offer mainly Swedish delicacies, such as roll-mop herring and smoked elk sausage, will appeal to a body of consumers looking for more specialty offerings.
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By GlobalDataThe retailer will need to translate the Ikea brand values from furniture to food, convincing consumers that the same product quality will be retained. Similarly, Ikea also needs to ensure that its aim to sell specialty food produce is not diluted by the products’ budget positioning (Ikea’s Food Markets look to sell produce at 30-40% below market price). Yet with the right marketing strategy, the chain is well placed to develop a lucrative add-on to its range by tapping into the vast consumer base that already swears by its affordable designer furniture.
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